Japanese government bond prices dipped on Thursday, with the benchmark 10-year yield briefly hitting a six-month high, before reversing early losses to end flat on bargain-hunting.
The 10-year yield rose to as high as 0.090 percent , its highest since July 12, before stepping back to 0.080 percent.
The price of 10-year JGB futures dipped initially to 150.25, their lowest since late October, on a rally in Japanese stocks and a rise in U.S. bond yields overnight.
But bargain-hunting in 10-year bonds helped the contract to recover from the loss to end 0.06 point higher at 150.37 .
“Those who traded the 10-year bonds at (the six-month high of) 0.09 percent were said to be offenders for pleasure. The selling was limited and wasn’t serious at all. A few players think the Bank of Japan will change its policy target any time soon,” said a trader at a Japanese brokerage.
Earlier this month, the BOJ reduced its buying in long-dated bonds in its regular operation earlier this month, sparking speculation the central bank may be inching towards exit from its massive stimulus.
But a majority of market players expect the BOJ to maintain its policy target of “around zero percent” in the 10-year yield in the coming months, and not certainly before Governor Haruhiko Kuroda’s current term expires in April.
An auction of 800 billion yen ($7.2 billion) 30-year JGB auction drew tepid demand as the tenor was currently not cheap on the yield curve. The yield spread between 10- and 30-year yields stood at 74.5 basis points, the tightest since June.
The 30-year yield rose 0.5 basis point to 0.835 percent . The 20-year yield was steady at 0.595 percent .