TOKYO Dec 16 Japanese government bond prices
eased on Friday, with the 10-year yield briefly hitting a
10-month high, as the bonds rout in the U.S. showed no signs of
ebbing though strong results of the Bank of Japan's bond buying
stemmed the losses.
Big falls in U.S. bonds since last month on expectations
President-elect Donald Trump's policies will boost economic
growth and inflation have pressured JGBs, posing a challenge to
the BOJ's policy to keep JGB yields under its control.
In early Friday trade, the 10-year JGB yield
rose to 0.100 percent.
Many market players have regarded that level as the upper
limit of the range in which the BOJ wants the 10-year yield to
stay, even though the central bank has not explicitly said what
its policy target - of "around zero percent" - really means.
After a small amount of trading was done at 0.100 percent,
the 10-year yield stepped back to 0.085 percent, since many
investors assumed the BOJ could take measures to bring down
The BOJ can send the strongest message to markets by
offering to buy an unlimited amount of bonds at a specific
level, such as 0.10 percent, just as it did on shorter
maturities last month.
Or it could increase its buying in that maturity at its next
operation, sending an indirect signal to markets that it is not
comfortable with current levels.
The BOJ took a step similar to the latter on Wednesday when
it increased buying in superlong bonds, after their yields shot
up to highest levels since February-March.
In an unusual move, the BOJ also made an pre-announcement on
Wednesday that it planned to buy super long bonds on Friday.
Yields on the longest end of the yield curve have been
capped since then.
The BOJ's buying on Friday drew limited amount of selling
from market players, helping to boost sentiment.
Superlong bond yields dipped as a result, with the 20-year
yield falling 1.5 basis point to 0.600 percent,
slipping further from Tuesday's 10-month high of 0.650 percent.
The 30-year yield fell 2.0 basis points to 0.695 percent
, having fallen more than 10 basis points from
nine-month high of 0.805 percent touched on Tuesday.
"The BOJ's action had an announcement effect. The market
conditions would be favourable until the year-end, given big
redemption on Dec 20 and the limited supply of new offers," said
Koichi Sugisaki, vice president of research at Morgan Stanley.
"But I won't say JGB yields have peaked. It all depends on
global bond markets," he added.
The 10-year yield last stood at 0.085 percent, up 1.0 basis
point on the day while the 10-yearJGB futures price fell 0.22
point to 149.50.
(Reporting by Hideyuki Sano; Editing by Shri Navaratnam)