TOKYO -(Dow Jones)- Japan's benchmark 10-year yield hit an eight-month low Thursday, as a warning by Moody's Investors Service on U.S. sovereign debt and remarks by the head of the U.S. Federal Reserve pushed the dollar down against the yen.
The 10-year cash Japanese government bond yield dipped to 1.070%--the lowest level since Nov. 19. Lead September futures also finished the day 0.33 higher at 141.75 after hitting 141.77, the highest price since Nov. 19.
JGBs have been on an uptrend recently as investors have flown to safe-haven assets due to spreading concerns over euro-zone sovereign debt problems.
The trend was reinforced when the dollar fell sharply against the yen after Moody's put U.S. debt on review for a possible downgrade and Fed chairman Ben Bernanke suggested that a new round of easing may be needed. That heightened concerns over Japan's export-dependent economy, boosting demand for JGBs.
The dollar sank as low as Y78.45 Thursday, briefly recovering to around Y79.60 at one point in the afternoon.
Reflecting solid results of a five-year auction earlier in the day, the five-year JGB yield also fell to 0.370%--its lowest point since Nov. 17.
Japan's Ministry of Finance sold Y2.1939 trillion of five-year JGBs at a lowest price of 100.09, yielding 0.381%. The price was slightly higher than traders' expectations of 100.07.
"The fact the auction went well despite the lack of pre-tender adjustments in the secondary market shows that demand for government bonds remains strong," said Maki Shimizu, a senior strategist at Citigroup Global Markets Japan.
Shimizu expects the JGB market to maintain strong momentum in the near term, until when the possibility of additional JGB issuance again becomes a theme of market talks. The 10-year yield could reach as low as 1.05% in the coming session, she added.
