Japan 10-year bond yields strike 5-month high despite strong debt market signals, solid demand at 30-year auction

The Japanese 10-year government bond yields hit a 5-month high Thursday despite solid signals emerging from global financial markets for the safe-haven market amid strong demand at the 30-year auction, held early today.

The benchmark 10-year bond yield, which moves inversely to its price, rose 1-1/2 basis points to 0.10 percent, the long-term 30-year bond yields climbed nearly 1 basis point to 0.89 percent and the yield on the short-term 2-year note traded 1 basis point higher at -0.10 percent by 06:40 GMT.

The 30-year bond auction worth JPY800 billion, held early today, witnessed a reopening of the JGB0.8 percent 6/2047 at 0.878 percent with a bid-to-cover at 3.62, which was little changed from last month's 3.63 but better than the average of 3.30 in 2016. The 9 sen tail was also better than June's 13 sen tail as well as the 29 sen average for 2016, Reuters reported.

Further, the latest FOMC meeting minutes, released late Wednesday, delivered a fairly mixed tone and showed that Fed policymakers were split on the outlook for inflation, hence there was concern as to the timing of future rate rises. Similarly, some members wanted to begin the process of reducing the Fed's balance sheet as early as August, whereas others opted to wait until later in the year.

Lastly, the Ministry of Finance also auctioned JPY3.565 trillion of 13-week bills at an average price of 100.0241 with a 0.00011 tail, which equates to an average yield of -0.0955 percent. There were JPY17.151 trilliion in total bids which equated to a 4.81 bid-to-cover.

Meanwhile, Japan’s Nikkei 225 closed 0.48 percent lower at 19,984.50, while at 06:00GMT and the FxWirePro's Hourly Yen Strength Index remained highly bearish at -59.03 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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