TOKYO—Japanese government bond yields fell as a weaker domestic stock market and a strong yen fueled demand for safe-haven assets.
A well-bid auction of five-year notes confirmed solid demand from domestic banks that should continue to support the market in the months ahead.
The benchmark 10-year yield fell 0.02 percentage point to 1.01%.
Yields also dropped after the Federal Reserve on Tuesday announced a step to keep its balance sheet from shrinking and acknowledged the U.S. recovery is slowing. The move fueled speculation that the Bank of Japan, which left its policy unchanged Tuesday, could take more easing action of its own in the coming months.
An auction of five-year bonds went smoothly despite the coupon being set at a seven-year low, as demand from banks, flush with cash due to low lending, remained strong.
The government sold 2.186 trillion yen ($25.61 billion) of the debt at a lowest price of 99.87 yielding 0.327%. The result was stronger than traders' expectations for a lowest price of 99.85-99.86. The average price was 99.88, yielding 0.325%.
"The result topped expectations, which were already quite strong," due in large part to demand from Japanese banks and other investors, said Akito Fukunaga, chief rates strategist at the Royal Bank of Scotland.
