TOKYO, Sept 2 Japanese government bonds fell on
Friday, sending some yields to five-month highs, as the usual
buyers took a step back ahead of the U.S. jobs report later in
the global day and some investors fretted about the Bank of
Japan's JGB purchasing plans.
The benchmark 10-year yield rose 2.5 basis points to minus
0.020 percent, its highest level since March.
The 20-year yield rose 5 basis points to 0.405 percent
, its highest since April 1, while the 30-year
yield rose 6 basis points to 0.500 percent, its
highest since March 31.
"Buyers don't like this kind of volatility," said Tadashi
Matsukawa, head of fixed income investment at PineBridge
Investments in Tokyo. "If policy is clarified, then people will
step up and buy, but until we know, buyers will be sidelined."
The BOJ's next meeting on Sept. 20-21 coincides with that of
the U.S. Federal Reserve. Some investors believe U.S.
policymakers could raise interest rates as early as this month
if economic data is strong enough.
The U.S. August nonfarm payrolls report is even more in
focus than usual, after Federal Reserve Vice Chair Stanley
Fischer said last week that the employment data would be a
factor in the timing of the central bank's interest rate hikes.
Employers are expected to have added 180,000 jobs in August,
according to the median estimate of 89 economists polled by
If the Fed opts to tighten, "then maybe the BOJ doesn't need
to do anything at all," Matsukawa said. "And ahead of nonfarm
payrolls, buyers are quite limited, so that's why we're seeing
the long end selling off."
A 30-year auction next week also weighed on longer
maturities. The Ministry of Finance will offer 800 billion yen
($7.74 billion) of JGBs in that tenor.
The BOJ also refrained from buying any longer maturities in
its asset purchase programme on Friday. It offered to buy 400
billion yen of 1- to 3-year JGBs, 420 billion yen of 3- to
5-year JGBs, and 430 billion yen of 5- to 10-year JGBs.
Most economists polled by Reuters expect the BOJ to ease
policy further this month, though views are divided.
The BOJ declared it will conduct a "comprehensive
assessment" on the impact of its stimulus measures at its next
meeting. Some JGB market participants have expressed concerns
that the BOJ might refrain from buying additional JGBs, or could
even reduce its purchases of long bonds.
While there is no consensus on what the BOJ's next step will
be, some believe it may lead to a steeper yield curve.
At its last policy meeting on July 29, the BOJ expanded its
stimulus with a modest increase in its purchase of
exchange-traded funds (ETFs) but did not raise its JGB purchases
or take other steps.
"They disappointed in July, and it could happen again," said
a fixed-income fund manager at a European asset manager in
($1 = 103.3200 yen)
(Reporting by Tokyo markets team; Editing by Jacqueline Wong)