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JGBs edge down, but superlong yields remain off highs
February 13, 2017 / 7:07 AM / 7 months ago

JGBs edge down, but superlong yields remain off highs

TOKYO, Feb 13 (Reuters) - Japanese government bonds edged lower on Monday, though yields were still well shy of recent highs after the Bank of Japan’s move last week to keep rising superlong rates in check.

The benchmark 10-year JGB yield rose 1 basis point (bp) to 0.090 percent, while 10-year JGB futures finished down 0.07 point at 149.85.

After the benchmark yield jumped to a one-year high of 0.150 percent earlier in the month, the BOJ responded by offering to purchase an unlimited amount of 10-year JGBs at 0.110 percent, sending a strong signal it would not stand idle as the yield rose.

On Friday, the BOJ increased its buying in the superlong zone, for only the second time in that sector since September when the central bank adopted its “yield curve control” policy under which it pledged to keep the 10-year yield around zero percent.

“It’s a quiet market, currently,” compared to Friday’s action, said Tadashi Matsukawa, head of fixed income investment at PineBridge Investments in Tokyo. “There was a lot of speculation that the BOJ was kind of abandoning to support the long end of the curve, but it seems they do care about it.”

On Monday, the 20-year yield added 0.5 bp to 0.670 percent, while the 30-year JGB yield rose 1 bp to 0.860 percent, both well below their respective one-year highs of 0.730 percent and 0.915 percent scaled earlier this month.

The 5-year yield inched 0.5 bp higher to minus 0.090 percent, while the 2-year yield shed 0.5 bp to minus 0.220 percent.

“The short end of the curve, particularly the 2-year sector, is running out of paper, and there’s less issuance coming, so probably the BOJ needs to make adjustments to that,” Matsukawa said.

Strong stocks also undermined demand for JGBs. The Nikkei stock index added 0.4 percent to a more than two-week high, helped by a weaker yen and relief that talks between U.S. President Donald Trump and Japan’s Prime Minister Shinzo Abe yielded no negative surprises.

Data released earlier on Monday showed Japan’s economy grew for a fourth straight quarter in the final three months of last year thanks to strong exports, though weak private consumption and rising protectionism in the United States suggested a sustainable recovery could be some way off. (Reporting by Tokyo markets team; Editing by Shri Navaratnam)

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