TOKYO: Japanese government bonds fell yesterday, even after firm demand at a sale of 10-year notes, underscoring broader concern that yields don’t fully price in inflation risks.
The decline in Japan’s debt market largely mirrored moves globally as the Iran war has raised the prospect of higher inflation.
Government bonds from the United States, Australia, South Korea and Indonesia have all dropped this week.
While the auction result in Tokyo was a relief, it didn’t change the big picture, according to Kazuya Fujiwara, a bond strategist at Mitsubishi UFJ Morgan Stanley Securities.
“Concerns about inflation are likely to keep upward pressure on yields,” he said.
Shuichi Ohsaki, a senior portfolio manager at Meiji Yasuda Asset Management Co, attributed buying at the sale to the recent rise in yields.
The bid-to-cover ratio of 3.3 was higher than the 3.02 at the last auction and the 12-month average of 3.23.
Oil, which has a major impact on inflation in Japan and around the world, extended its gains yesterday as the United States and Israel stepped up their war against Iran.
Meanwhile, the yen has weakened since the attack on Iran and was trading around 157.30, after breaching the 157 mark on Monday for the first time since early February. — Bloomberg
