JGB yield curve steepens with investors cautious over fiscal stimulus
By Kevin Buckland
TOKYO, Nov 11 (Reuters) - Long-dated Japanese government bond yields climbed on Tuesday, steepening the yield curve, with markets adjusting to the new prime minister Sanae Takaichi's desire for flexible fiscal spending.
Yields on 30-year JGBs extended their initial rise following a weak result at an auction of the securities in the afternoon.
The 30-year yield JP30YTN=JBTC added 4 basis points (bps) to 3.17%, rising for a fourth straight session to a four-week high.
The 20-year yield JP20YTN=JBTC added 2 bps to 2.67% in the morning session, and had not traded since the auction result.
The 10-year JGB yield JP10YTN=JBTC, by contrast, fell 1 bp to 1.69%.
"The auction was weak, suggesting a cautious stance among bond investors," said Norihiro Yamaguchi, an economist at Oxford Economics.
"With multiple expansionary fiscal policy news headlines these days, investors may be hesitant to enter ultra-long JGBs at this point, at least till the outlook for the fiscal stance becomes clear."
Takaichi said on Monday she would work on setting a new fiscal target extending through several years to allow more flexible spending, essentially watering down the country's commitment to fiscal consolidation.
She also renewed calls for the Bank of Japan to go slow on interest rate hikes, despite signs that most central bank policymakers would prefer to see a resumption of monetary tightening sooner rather than later.
A combination of low rates and expansionary fiscal policy "should put steepening pressure on the yield curve," Yamaguchi said.
The two-year JGB yield JGB2YTN=JBTC, which is the most sensitive to monetary policy expectations, declined 1 bp to 0.93%, while the five-year yield JP5YTN=JBTC also lost 1 bp to 1.25%.
Japan yield curve steepens on fiscal worries
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