Japanese 30-year bond yields ease before auction as snap election looms

By Kevin Buckland

TOKYO, Feb 5 (Reuters) - Japan's 30-year government bond yields ticked lower on Thursday ahead of an auction of the securities later in the day, even as a crucial election loomed on Sunday that would determine the outlook for the government's big fiscal stimulus plans.

The 30-year JGB yield JP30YTN=JBTC fell 1.5 basis points (bps) to 3.62%, but remained within the relatively narrow band of the past two weeks, as calm returned to the market following a bond rout on January 19-20 after Prime Minister Sanae Takaichi called the snap election with a pledge to waive the sales tax on food for two years.

The 30-year yield shot up to an all-time peak of 3.88% at that time. Bond yields rise when prices fall.

So-called super-long bonds have been particularly sensitive to perceived loosening of fiscal restraint by Takaichi, an acolyte of former premier Shinzo Abe's "Abenomics" policies, with Japan already the developed world's most indebted nation.

Takaichi's Liberal Democratic Party could capture as many as 300 seats in the 465-seat lower house, recent newspaper polls showed.

"With uncertainty regarding fiscal policy expected to remain until specific policy details are revealed well after the election result is known, a sharp decline in interest rates is unlikely in the near term," Mizuho Securities analysts said in a research note.

However, the "significantly" higher yields on 30-year debt compared to the previous auction on January 8, when they stood at around 3.5%, should lure buyers to Thursday's sale, they added.

Other JGB tenors were flat to slightly lower, with the 20-year yield JP20YTN=JBTC unchanged at 3.18%, the 10-year yield JP10YTN=JBTC declining 0.5 bp to 2.25%, the five-year yield JP5YTN=JBTC falling 1 bp to 1.685%, and the two-year yield JP2YTN=JBTC down 0.5 bp 1.275%.