| TOKYO, Sept 12
TOKYO, Sept 12 Yield curves for Japanese
government bonds steepened on Monday on speculation that the
Bank of Japan will change its policy and as traders took
positions ahead of a 20-year JGB auction later in the week.
The 30-year JGB yield rose to as high as 0.555 percent
, its highest level since late March and last
stood at 0.550 percent, up 4.0 basis points.
The 20-year yield hit a six-month high of 0.475 percent
while the 40-year yield hit a
six-month high of 0.615 percent.
The Bank of Japan is studying several options to steepen the
bond yield curve, sources familiar with its thinking said.
Traders were also preparing for an auction of 1.1 trillion
yen ($10.74 billion) of 20-year JGBs on Tuesday, which they
worry could draw weak demand due to speculation that the BOJ
could change its policy stance.
"Given the market anxiety over the BOJ, few would be ready
to buy at the auction, especially around the current yield
levels," said Jun Fukashiro, head of fixed income investment at
Sumitomo Mitsui Asset Management.
The market was also affected by the sell-off in global bonds
after the European Central Bank bluntly denied it had any
discussion on easing last week.
Investors are also starting to fret that the U.S. Federal
Reserve might be serious about lifting U.S. interest rates as
early as next week as some Fed members have been trying to
convince markets that the September meeting would be "live" for
a hike, even though futures <0#FF:> only imply a one-in-four
chance of a move.
On the other hand, the yields on shorter-date JGBs dropped,
as investors bet the BOJ may cut interest rates further in order
to steepen the yield curve.
The two-year yield fell 4.5 basis points to
minus 0.250 percent, its lowest level since Aug 1.
The yield spread between two- and 30 year bonds widened to
80 basis points, the largest since mid-March, up from around low
around 35 basis points hit in late June but still below around
120 basis points before the BOJ introduced negative interest
rates in January.
Caught in the middle, the 10-year JGB yield rose just 1.0
basis point to minus 0.010 percent.
The price of 10-year JGB futures rose 0.04 point at 151.17
($1 = 102.44 yen)
(Reporting by Hideyuki Sano; Editing by Simon Cameron-Moore)