TOKYO: Japanese government bond (JGB) yields were mostly unchanged on Tuesday, as the market awaited the Bank of Japan’s (BOJ) monetary policy decision ahead of a key US jobs report this week.
While some buying was seen earlier in the day, the 10-year JGB yield was last flat at 0.97%, while 10-year JGB futures were down just 0.02 points at 143.85 yen.
JGB yields, which move inversely to bond prices, rose across the curve on Monday after Japan’s ruling coalition lost its majority in Sunday’s election.
Along with questions about how the political shake-up could impact monetary policy, bond investors have been focused on whether power-sharing deals with opposition parties will lead to bigger government spending.
Analysts have projected that scenario could lead to a steepening in longer-dated bond yields.
The impact on the market won’t be clear until the actual figures for the supplementary budget are known, which likely will not happen until mid-November, said Yurie Suzuki, a market analyst at Mizuho Securities.
“Until then, it might be a difficult environment to make a move.”
In the meantime, market focus will largely be on overseas events, including the closely watched US nonfarm payrolls report on Friday and the Nov. 5 presidential election, Suzuki added.
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The BOJ is expected to stand pat at its monetary policy meeting on Oct. 30-31, although market players will be looking for less dovish signals from the central bank as the yen languishes near a three-month low.
The two-year JGB yield fell 1 basis point (bp) to 0.445%, after solid demand was seen at an auction for the bonds on Tuesday.
The bid-to-cover ratio, a common measure of demand at auctions, improved to 4.87 from 3.81 in September.
The five-year yield was unchanged at 0.59%.
The 20-year JGB yield and 30-year JGB yield were both flat at 1.81% and 2.215%, respectively.
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