JGBs fall on improvement in risk sentiments; solid 10-year auction supports yields

The Japanese government bonds closed lower Tuesday as investors shifted away from risk-haven assets after a 10-year auction attracted solid sales, thus pushing yields higher.

The yield on the benchmark 10-year JGB note, which moves inversely to its price, jumped 10 basis points to -0.065 percent, the yield on the long-term 30-year hovered around 0.516 percent and the yield on short-term 2-year surged 13 basis points to -0.157 percent by 06:40GMT.

Today’s JPY2.1 trillion ($18.86 billion) 10-year JGB auction still managed to draw ample demand from investors gearing up for the new fiscal year. The bid-to-cover ratio, a gauge of demand, at the auction rose to 5.07 from 4.25 at the previous sale in March, when the domestic fiscal year ended.

More economic green shoots in the form of China’s Caixin manufacturing PMI which beat expectations to rise to 50.8 in March and US’ manufacturing ISM which also rose from a two-year low and topped estimates at 55.3 in March saw market optimism lifted further overnight, OCBC Treasury Research reported.

Wall Street rose with S&P500 closing at its highest level since October, while the UST bond market was pressured with the 10-year yield rebounding 10bps to 2.5 percent in its largest one-day jump since January 4, the report added.

Meanwhile, the Nikkei 225 index closed tad lower at 21,505.31, while at 06:00GMT, the FxWirePro's Hourly JPY Strength Index remained highly bearish at -127.298 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex