Japanese government bond prices closed higher on Tuesday following gains in U.S. Treasuries overnight as investors made safe-haven bets due to revived worries about the U.S. financial sector.

The positive results of the bond auction also helped along with the decline in share prices. The finance ministry said the lowest accepted price at the auction of 1.7 trillion yen ($15.8 billion) worth of 2-year JGBs was 100.005 yen, giving a yield of 0.797 percent.

The bid-to-cover ratio was 3.3 to one, higher than the previous auction’s 2.47 to one.

The release of weak economic data this morning also led investors to bonds. The government said Japan’s unemployment rate hit a two-year high of 4.1 percent last month while job openings slumped to over three-year lows as companies became increasingly reluctant to hire new staff amid rising inflation and sluggish demand.

Household spending fell 1.8 percent in June from a year earlier.

“Since last week’s trade surplus, Japanese data have painted a dismal economic condition. Japan’s economy is stagnant but it is in a recession from the JGB market’s view,” said Satoshi Yamada, general manager at Okasan Asset Management.

The benchmark Nikkei 225 index closed down 1.5 percent at 13,159.45 as investors took their cue from Wall Street’s losses overnight.

The yield on the benchmark 10-year bond fell to 1.545 percent from 1.565 percent on Monday.

The yield on the two-year note slipped to 0.775 percent from 0.795 percent, while the yield on the five-year note dropped to 1.110 percent from 1.145 percent.

The yield on the 20-year bond fell to 2.190 percent from 2.205 percent and there were no successful transactions in the 30-year bond.

Bond prices move inversely to yields.

The price of the September futures contract rose to 136.23 yen from 135.88 yen on Monday.

($1=107.35 yen)

Source: http://www.afxnews.com

Related Content