TOKYO: Japanese government bonds (JGBs) rose on Friday as investors bought safe-haven assets after Israel said it attacked Iranian nuclear targets, stoking geopolitical worries.
The 10-year JGB yield fell to as low as 1.385%, its lowest since May 12.
It was last at 1.41%, 4.5 basis points (bps) lower than on Thursday.
Yields move inversely to prices.
Super-long JGB yields rise after weak auction, reversing earlier declines
“The yields fell sharply after the news about Israel’s attack,” said Miki Den, a senior Japan rate strategist at SMBC Nikko Securities.
Early on the day, Israel said it had struck Iranian nuclear targets to prevent Tehran from developing atomic weapons, with Iranian media and witnesses reporting explosions, including at the country’s main uranium enrichment facility.
The demand for safe-haven assets was a tailwind for super-long JGBs, which have struggled to attract investors at a series of auctions in the past few weeks.
The 20-year JGB yield fell 3.5 bps to 2.36%.
On Thursday, the outcome of the finance ministry’s liquidity enhancement auction for bonds with maturities between 15.5 and 39 years worsened from a similar auction in April.
But Japanese Government Bond, which has a maturity of 35 years, and with a maturity of nearly 30 years, were among the few tenors that got the highest bids, the finance ministry said.
SMBC Nikko’s Den said there was a demand from investors to cover short positions of super-long bonds.
“They made short positions on those bonds, but then wanted to buy them back after seeing news that signalled the finance ministry’s willingness to improve demand,” said Den.
The yields on super-long bonds hit record highs in May but were on the decline after Reuters reported last month that Japan’s finance ministry was considering reducing their sale.
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