By Kevin Buckland
TOKYO, Jan 5 (Reuters) - The yield on the benchmark 10-year Japanese government bond eased on Thursday as the market welcomed new supply with the highest coupon since December 2014.
Futures also ticked higher as traders said the 10-year note auction result was "smooth". The Ministry of Finance raised the coupon from 0.2% to 0.5%, matching the new policy ceiling set by the Bank of Japan in last month's surprise hawkish tweak to its yield curve controls.
Overnight declines in U.S. Treasury yields piled on additional pressure.
The 10-year JGB yield fell 3 basis points to 0.425% by 0546 GMT.
Benchmark 10-year JGB futures rose 0.26 yen to 145.67, rebounding from Wednesday's eight-year low of 145.26.
However, the 10-year note with nine years to maturity was yielding 0.539%, topping the BOJ's policy limit, and had earlier touched 0.556%.
"While all seems calm on the surface, a sense of desperation is gripping Japan's government bond market as the BOJ becomes encircled by sellers," Jefferies analysts wrote in a client note titled "Japan: We Won't Get Fooled Again".
"Crawling pegs are notoriously difficult to implement when 'Mr. Market' sniffs that policy makers are cornered."
The BOJ offered to lend 2 trillion yen of two-year JGBs at a fixed rate of zero percent against pooled collateral on Thursday, announcing such an operation for a second straight day, and doubling the amount offered on Wednesday.
However, the central bank forewent an unscheduled bond buying operation for the first time in five days.
The 20-year JGB yield fell 1 basis point to 1.330%, after earlier extending an eight-year high to 1.350%.
The 30-year yield was flat at 1.645%, while the five-year yield fell 0.5 basis point to 0.215%.
The two-year JGB did not trade, and last yielded 0.025%. (Reporting by Kevin Buckland Editing by Vinay Dwivedi)
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January 05, 2023 at 01:22PM
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JGB 10-year yield eases on 'smooth' auction with coupon at 8-year high - Yahoo Finance
"smooth" - Google News
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