JGB yields track US peers higher after resilient labour data

TOKYO: Japanese government bond yields rose on Monday, buoyed by an advance for US Treasury yields after resilient labour market data on Friday saw traders pare back bets for a near-term Federal Reserve interest rate cut.

The 10-year JGB yield rose 1.5 basis points (bps) to 1.470% as of 0515 GMT.

The two-year JGB yield also added 1.5 bps to 0.775%, while the five-year yield climbed 2 bps to 1.030%.

That’s after 10-year Treasury yields jumped 11.5 bps on Friday as a rise in non-farm payrolls for May and gains for wages topped economist estimates.

Traders now see 63% odds of a Fed cut by September, down from 74% before the jobs data. Benchmark 10-year JGB futures fell 0.18 yen to 139.17 yen. Yields rise when bond prices fall.

The 20-year JGB yield added 2.5 bps to 2.355%, and 30-year yield advanced 3.5 bps to 2.910%.

For those super-long bonds, yields remained a long way from last month’s peaks: a quarter-century high of 2.600% for 20-year JGBs and a record 3.185% for 30-year JGBs.

Investors shied away from the longest-dated securities amid growing angst about developed-nation deficits, including in Japan, which were later exacerbated by poor results at super-long JGB auctions.

However, a turning point for the market came when Japan’s finance ministry pledged to examine reduced issuance of super-long debt, according to Yunosuke Ikeda, chief macro strategist at Nomura.

Japan 30-year bond auction bid-to-cover ratio 2.92, lowest since December 2023

Now, in the event of a poor JGB auction, investors still buy the bonds in the belief that the finance ministry will pare issuance by even more.

“A kind of built-in stabilization system is at work,” Ikeda said.

“In that sense, we can say the worst period is over.”