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Japanese government bonds rose on June 28, with yields of most maturities logging record lows, as investors continued to fret about the fallout from Britain’s stunning vote last week to exit the European Union.
Fears of Brexit’s impact on global economic growth as well as expectations of more stimulus from the Bank of Japan also underpinned demand at an auction of two-year JGBs.
The Ministry of Finance offered 2.3 trillion yen ($22.55 billion) of 2-year JGBs with a 0.100 percent coupon. The notes sold at a low price of 100.795 with a record low yield of minus 0.295 percent. The sale drew bids of 4.96 times the amount offered, below the previous sale’s bid-to-cover ratio of 5.52 times though still suggesting strong demand. The tail between the average and lowest accepted prices was 0.008 compared with 0.003 at last month’s offering, indicating demand for the bonds remains strong.
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After the sale, the 2-year JGB yield gave up half a basis point to a record low minus 0.295 percent, to match the yield on the 5-year JGB. The 5-year yield shed 1 basis point, moving back toward its record low of minus 0.305 percent hit on June 16.
The benchmark 10-year JGB yield fell 2.5 basis points to a record low of minus 0.225 percent.
In the superlong zone, the 20-year JGB yield fell 4 basis points to a record low 0.040 percent. The 30-year JGB yield gave up 4.5 basis points to a record low 0.050 percent , while the 40-year JGB yield fell 4 basis points to 0.080 percent after touching a record low of 0.075 percent earlier.
“BOJ does not need to cut rates – the market is doing it for it,” said a rates strategist at a Japanese brokerage. ($1 = 101.9900 yen)