JAPANESE government bond (JGB) yields ticked higher on Monday (Feb 20) following spikes in Treasury yields last week, as investors bet on higher US interest rates for longer.

Still, market participants were cautious ahead of a week packed with Federal Reserve speeches and US data releases, culminating in a parliamentary testimony by the incoming Bank of Japan (BOJ) leadership team on Friday.

The two-year JGB yield rose 0.5 basis point to minus 0.045 per cent. The five-year yield added 0.5 basis point to 0.215 per cent, hitting a one-month peak.

The 10-year yield was flat at 0.5 per cent, which is the ceiling under the BOJ’s yield-curve control policy. Benchmark 10-year JGB futures, however, rose a muted 0.04 yen to 146.65.

The 20-year yield gained one basis point to 1.32 per cent, and the 30-year yield advanced 0.5 basis point to 1.49 per cent.

While BOJ governor nominee Kazuo Ueda has shown himself so far to be a policy dove, investors still expect an end to the yield-curve control policy during his tenure, which is due to start in April.

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Data from the Japan Securities Dealers Association on Monday showed that, in January, foreign investors sold the most JGBs on record, at 4.12 trillion yen (S$41 billion). Japanese insurers were also record sellers of super-long bonds in the month, with sales totalling 446.2 billion yen.

The sell-offs came as markets speculated about another loosening – or even abandonment – of the yield-curve control policy. But the BOJ instead maintained policy settings at its meeting; analysts said this likely resulted in some bonds being bought back in the latter part of January.

The biggest buyer in the month was an opaque category labelled “Others”, which snapped up 9.7 trillion yen.

Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management, said: “There could be a variety of other entities, but it’s safe to assume that the bulk of that is the BOJ.” REUTERS