The Economic Times, citing Reuters, reported that Japan's 20-year government bond yield declined in early Tokyo trading Wednesday after a stronger auction, putting long-term debt in focus ahead of the Bank of Japan's next policy meeting.
The report put the yield at 3.690%, one basis point lower and on course for a third daily decline. That Oct. 21 trading quote differs from the 3.723% yield at the weighted average price in the previous day's auction: one measures trading after the sale, while the other measures the sale itself.
At the Oct. 20 auction of 20-year bonds, Japan's Ministry of Finance received ¥3,139.0 billion in competitive bids and accepted ¥537.1 billion through competitive bidding. That produced a ratio of about 5.84 to 1, up from about 4.01 to 1 at the Sept. 15 sale. The ministry also accepted ¥162.8 billion through a separate non-price competitive auction; that amount is outside the 5.84-to-1 calculation.
Following the Oct. 20 sale, the 20-year bond traded at a 3.71% yield, six basis points lower, Reuters reported. Masahiko Loo, senior fixed-income strategist at State Street Investment Management, told Reuters that Japanese bonds were gaining appeal as a relative haven amid political and fiscal volatility in Europe. The auction totals establish the scale of bidding but do not identify buyers or their reasons for participating.
The Bank of Japan's overnight call-rate target has been around 1.25% since Sept. 24. In a Reuters poll conducted Oct. 13-19, 54 of 78 economists expected the rate to reach 1.50% in the fourth quarter. Among 54 respondents who named a month, about 80% chose December and 2% chose the meeting ending Oct. 30. Those figures describe economists' expectations, not a central bank decision.
The Bank of Japan meets Oct. 29-30. Its policy statement and The Bank's View of the October outlook are scheduled for Oct. 30, followed by the full outlook text Nov. 2.
