JGB yields edge down; 10-year yield touches one-month low

Japanese government bond (JGB) yields declined on Friday, with the benchmark 10-year yield brushing a one-month low as US Treasury yields dropped and investors adjusted positions ahead of a holiday weekend in Japan.

The 10-year JGB yield was down 2 basis points (bps) at 0.84 per cent as of 0500 GMT, after earlier touching its lowest since August 15 at 0.83 per cent.

Futures of 10-year JGBs rose 0.21 points to 144.75 yen.

Both the Wall Street Journal and the Financial Times reported that the Federal Reserve might still be on the fence about cutting interest rates by 25 bps or 50 bps, causing US Treasury yields to fall during Asian trading hours.

JGBs also saw some buying as the direction of their US peers shifted.

Makoto Suzuki, senior bond strategist at Okasan Securities, said moves in the JGB market were driven more by seasonal factors at play, including a redemption of government bonds scheduled for later this month.

September tends to be "a period when buying is strong" as a result, he said.

Japan's markets will be closed on Monday for a public holiday, leading to some position adjustments ahead of the long weekend.

Markets are pricing in a little over 100 basis points of cuts from the Fed within the year, meaning a super-sized cut is expected sometime this year.

The Bank of Japan (BOJ) will also meet to decide monetary policy next week, where it is set to leave rates unchanged. More than half of economists polled by Reuters last month forecast the BOJ will hike again by the end of the year.

The 20-year JGB yield and 30-year JGB yield both fell 3 bps to 1.64 per cent and 2.015 per cent, respectively.

The two-year JGB yield briefly ticked down 0.5 bp to 0.38 per cent before rising to sit flat.

The five-year yield was down 1 bp to 0.495 per cent.