September 22, 2017 / 7:02 AM / 10 months ago

JGBs edge up as North Korea tensions sap risk appetite

TOKYO, Sept 22 (Reuters) - Japanese government bonds firmed on Friday, taking cues from rising risk aversion as tensions escalated on the Korean peninsula.

The 10-year cash JGB yield was down half a basis point at 0.020 percent, while the 10-year JGB futures contract finished up 0.05 point at 150.85.

North Korean Foreign Minister Ri Yong Ho said on Friday he believes the North could consider a hydrogen bomb test of an unprecedented scale in the Pacific Ocean, South Korea’s Yonhap news agency reported.

The report followed North Korean leader Kim Jong Un’s statement on Friday that Pyongyang will consider the “highest level of hard-line countermeasure in history” against the United States in response to U.S. President Donald Trump’s threat to destroy the isolated nation.

The heightened rhetoric increased the appeal of safe-haven government debt. The yield on benchmark 10-year Treasury notes stood at 2.257 percent, down from its U.S. close on Thursday of 2.278 percent.

Also underpinning JGB market sentiment, the Bank of Japan maintained its policy settings on Thursday, including its loose pledge to keep buying bonds so its holdings increase at an annual pace of 80 trillion yen ($717.6 billion). A new board member argued against the central bank’s view that current policy was sufficient to boost inflation to its target. (Reporting by Tokyo markets team; Editing by Sunil Nair)

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