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Short-end JGBs sag on supply woes, risk aversion lifts long-end bonds
June 7, 2017 / 5:42 AM / 6 months ago

Short-end JGBs sag on supply woes, risk aversion lifts long-end bonds

TOKYO, June 7 (Reuters) - Short-end Japanese government bond prices sagged on Wednesday due to oversupply concerns while risk aversion gripping the broader financial markets lifted longer-dated maturities.

The two-year JGB yield rose 2.5 basis points to minus 0.120 percent, its highest since mid-November.

The two-year JGBs have faced headwinds as the Bank of Japan has recently been trimming its buying of bills and shorter-dated debt at regular JGB-buying operations in an attempt to improve market liquidity, which had practically dried up under its extensive easing scheme.

Selling by participants making room for Thursday’s 2.2 trillion yen ($20.09 billion) five-year JGB auction also weighed on shorter-dated debt. The five-year yield rose 1 basis point to minus 0.100 percent, its highest since late February.

Long-end JGBs, on the other hand, took immediate cues from U.S. Treasuries, which saw their benchmark yield fall to seven-month lows overnight ahead of Thursday’s general election in Britain, the European Central Bank’s policy meeting, and former FBI Director James Comey’s testimony before a Senate panel.

JGBs further out on the curve were also supported as the Bank of Japan conducted a regular debt-buying operation on Wednesday. The central bank bought 750 billion yen ($6.85 billion) of JGBs with maturities from 5 years to those exceeding 25 years.

The 20-year yield fell 1 basis point to 0.545 percent and the 30-year yield declined 0.5 basis point to 0.800 percent. ($1 = 109.4800 yen) (Reporting by the Tokyo markets team; Editing by Eric Meijer)

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