December 5, 2019 / 6:27 AM / 2 months ago

Long-dated JGB yields down after solid auction, curve flattens

TOKYO, Dec 5 (Reuters) - Long-dated Japanese government bond yields dropped on Thursday as solid demand during an auction of 30-year JGBs boosted prices, but a rise in shorter yields on improving risk sentiment helped flatten the yield curve.

The auction of 700 billion yen 30-year JGBs drew bids 3.69 times the offer, slightly higher than the 3.66 times in the previous auction.

In another sign of firm demand, the tail, or the gap between the lowest and average prices, at the auction shrank to 0.05 from 0.16 in the previous tender.

This helped to bring down yields on super-long bonds.

The 30-year JGB yield fell 1 basis point to 0.420%, while the 40-year JGB yield fell 1.5 basis points to 0.445%.

The price of shorter-dated bonds also pared earlier losses but remained under water as revived hopes of a U.S-China trade deal dented their attraction.

U.S. President Donald Trump said negotiations with China were going “very well,” fanning the positive mood sparked by a Bloomberg report that the two sides were closer to agreeing how many tariffs would be rolled back in a “phase one” trade deal.

The benchmark 10-year JGB futures price was down 0.05 point at 152.68 by late trading. It fell to as low as 152.49, just above its 7 1/2-month low of 152.39 touched earlier this week.

The 10-year cash JGB yield was up 0.5 basis point at minus 0.035%.

The five-year yield rose 1 basis point to minus 0.140% and the two-year JGB yield edged up 1 basis point to minus 0.150%, matching a seven-month high touched on Tuesday. (Reporting by Tokyo Markets Team; Editing by Sriraj Kalluvila)

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