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Economy

Benchmark JGB yield at 1-year high as BOJ speculation grips market

TOKYO (Reuters) -- The benchmark 10-year Japanese government bond yield rose to the highest in a year on Thursday as concerns that the central bank might be moving closer to unwinding its massive monetary stimulus continued dogging the debt market.

The 10-year yield was 3 basis points higher at 0.095 percent after brushing 0.100 percent, its highest since July 2017.

Bond yields pushed higher on Thursday after an auction of two-year JGBs attracted lukewarm investor demand, with the market on edge ahead of the Bank of Japan's two-day policy-setting meeting which begins on July 30.

The bid-to-cover ratio, a gauge of demand, at the 2.1 trillion yen ($18.95 billion) two-year sale fell to 4.38 from 4.88 at the previous auction last month.

Since last weekend, speculation has been rife towards what the Bank of Japan (BOJ) could do. According to various media reports, possible policy changes on the agenda include adjustments to interest-rate targets to make the BOJ's massive stimulus programme more sustainable.

The BOJ has been buying JGBs as part of its yield curve controlling scheme, but concerns have grown that the central bank could eventually run out of bonds to purchase if it keeps absorbing huge amounts of debt.

The 40-year yield rose 4 basis points to 0.955 percent after hitting 0.960 percent, its highest since early February.

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