TOKYO, June 14 Japanese government bond prices
rose on Friday after a better-than-expected five-year debt
auction, despite improving investors' risk appetite with Tokyo's
Nikkei average rebounding from a more than 6 percent slide in
the previous session.
The 2.7 trillion yen ($29 billion) of five-year bonds sold
by Japan's Ministry of Finance attracted a bid-to-cover of 4.36,
up from 3.39 in the previous debt sale.
"The results were on the better side of expectations," said
Naomi Muguruma, senior fixed-income strategist at Mitsubishi UFJ
Morgan Stanley Securities. "Probably due to recent instability
in equities and the FX market, I think the risk-avoidance money
went into this five-year auction."
The five-year yield eased 3.5 basis points to
The 10-year yield fell 4.5 basis points to
0.815 percent, keeping within the past two weeks' trading range
of 0.80 to 0.90 percent, while 10-year futures gained
0.46 point to 142.80, breaking above their five-day moving
average at 142.66.
"Yesterday the Nikkei was down 6 percent and the JGB market
didn't go up," said Tadashi Matsukawa, head of Japan fixed
income at PineBridge Investments. "What's driving the Nikkei is
that JGB (prices) going higher, then the Nikkei is going
The Nikkei climbed 1.9 percent on Friday, while JGB
prices were also higher. Government bond prices usually rise
when investors are risk averse, or vice versa.
The 30-day implied volatility on JGB futures
remained well about 5 percent compared with just above 2 percent
before the Bank of Japan shocked investors in April with massive
stimulus measures to pull the economy out of doldrums.
JGBs volatility spiked as the BOJ's aggressive pursuit of
inflation - an enemy of bond investment - stunted markets while
its big bond-buying plan has reduced market liquidity.
Prices on longer-maturities were also higher. The 20-year
yield and the 30-year yield both
added 1 basis point, to 1.670 and 1.795 percent, respectively.