October 3, 2016 / 5:01 AM / a year ago

Superlong JGB yields dip after BOJ reduces buying only slightly

TOKYO, Oct 3 (Reuters) - Yields on superlong Japanese government bonds dipped on Monday as investors registered relief that the Bank of Japan only slightly trimmed its JGB buying, while yields on shorter maturities rose in tandem with U.S. bond yields.

The 30-year JGB yield fell 1.5 basis points to 0.440 percent, while the 20-year yield dipped 1.0 basis point to 0.345 percent.

The BOJ said on Friday it will trim the amount of its buying operation in JGBs with maturity over 10 years to 300 billion yen ($2.96 billion) each time in October from 320 billion yen in recent months.

Although that is going to be its lowest level of buying since 2014, the size of cut was smaller than some market players had expected.

Yields on shorter maturities rose a tad, tracking gains in U.S. bonds late last week on some easing in worries over the financial health of Germany’s biggest lender Deutsche Bank .

A report that Deutsche Bank was close to a settlement of $5.4 billion fine with U.S. authorities over the sale of toxic mortgage bonds helped to fuel a recovery in its shares on Friday.

The 10-year yield rose 1.0 basis point to minus 0.075 percent, off its low of minus 0.090 percent hit last week.

The BOJ reduced buying in JGBs with five to ten years to maturity on Friday, a move many market players took as a sign that the BOJ wants to keep the 10-year yield above minus 0.10 percent.

“The JGB yield curve is likely to stay near the current levels for the time being after the BOJ indicated that the bottom of its target range is minus 0.10 percent,” said Naoya Oshikubo, fixed income strategist at Barclays.

The BOJ introduced a new policy last month of guiding the 10-year yield around zero percent, ditching its quantitative easing target.

The five-year yield rose 1.0 basis point to minus 0.240 percent while the two-year yield rose a half basis point to minus 0.280 percent.

The BOJ bought a total of 890 billion yen JGBs with maturity of up to five years on Monday.

The 10-year JGB futures price fell 0.13 point to 152.21 .

$1 = 101.45 yen Reporting by Hideyuki Sano; Editing by SImon Cameron-Moore

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