Japan’s government bond yield curve steepens slightly; 2-year auction shows solid performance

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智通财经2026/10/29 10:07

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Japanese government bond futures lacked clear direction on Thursday, with the yield curve slightly steepening ahead of the Bank of Japan policy meeting. The 2-year auction performed well ahead of the central bank meeting.
Futures opened at 126.42, up 13 ticks from the previous day, rising to 126.48 within 15 minutes. However, cash bonds did not follow suit, and when futures fell back to the day's low of 126.16, selling pressure appeared on the 5-year and 30-year maturities.
The 5-year yield rose 1.5 basis points to 2.28%, the 30-year increased 2 basis points to 3.895%, while the 10-year only rose 0.5 basis points to 2.83%.
In the afternoon, buying interest in the 10-year re-emerged, pulling the yield back down to 2.815%. Combined with a strong 2-year auction, futures climbed to the day’s high of 126.48 after midday.
The 2-year auction closed at 1.912%, with a tail of 0.7 basis points. The bid-to-cover ratio rose to 4.03 from 3.89 last month. The strong results kept short-term yields low throughout the day.
After the auction, long and super-long yields briefly pulled back but rebounded by the close. The 10-year yield climbed to 2.835%, up 1 basis point from the previous day, while the 30-year returned to its early session high of 3.895%.
In terms of capital flows, a Tokyo investor bought JU19, while the 40-year performed robustly. An offshore account sold 10-year and 20-year bonds, and a corporate account continued to buy the old 20-year JL179, which may be purchased again tomorrow.
The market focus is shifting to Bank of Japan Governor Kazuo Ueda’s press conference on Friday. The central bank is widely expected to maintain its policy rate unchanged, with a survey showing 99% of 147 respondents anticipate no policy change at this meeting.
Most respondents expect the Bank of Japan to raise rates to 1.5% in December and to 1.75% in either March or April next year, but opinions vary on the pace of further rate hikes. The market will watch for whether Kazuo Ueda makes any hawkish comments or indicates that the pace of future tightening will depend on inflation.
At the close, the 10-year futures fell 0.05 to 126.24. The 2-year yield dropped 0.5 basis points to 1.895%, the 5-year rose 0.5 basis points to 2.270%, the 10-year climbed 1.0 basis point to 2.835%, and the 20-year increased 2.0 basis points to 3.670%.
Overnight index swaps showed a 1.5% probability of a 25 basis point rate hike at the October meeting, unchanged from the previous day, while the probability for a December hike was 83.0%, down slightly from 84% on Wednesday.
The Nikkei Index rose by 705.28 points, or 1.1%, to 64,659.47 points, and the USD/JPY was at 157.85.

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Japan’s government bond yield curve steepens slightly; 2-year auction shows solid performance

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