July 6, 2020 / 5:37 AM / a month ago

JGBs dip as China recovery hopes boost risk appetite

TOKYO, July 6 (Reuters) - Japanese government bonds dipped on Monday as hopes of a solid economic recovery in China boosted investors’ risk sentiment and lifted regional stock prices ahead of a crucial 30-year debt auction.

Investors are looking to the auction of 0.9 trillion yen ($8.36 billion) 30-year JGBs on Tuesday as a key test of investor appetite, the first auction of that maturity since the Ministry of Finance raised the monthly sales by 200 billion yen.

The Bank of Japan has been indicating a preference to see a steeper yield curve, helping to lift yields on superlong JGBs to the highest levels since early 2019 last week.

Benchmark 10-year JGB futures fell 0.18 point to 151.78 while the 10-year JGB yield rose 1.5 basis points to 0.035%.

The BOJ increased its buying of JGBs with more than five to 10 years to maturity by 20 billion yen to 420 billion yen in its market operation on Monday, in line with expectations.

The 20-year JGB yield rose 0.5 basis point to 0.425%, edging back to the 16-month high of 0.45% touched last week.

The 30-year JGB yield rose 0.5 basis point to 0.625% while the 40-year JGB yield was flat at 0.655%.

The two-year JGB yield rose 0.5 basis point to minus 0.140%. The five-year yield rose 1 basis point to minus 0.095%.

$1 = 107.65 yen Reporting by Hideyuki Sano; Editing by Shailesh Kuber

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