July 29, 2016 / 4:40 AM / a year ago

JGBs skid after BOJ easing announcement

TOKYO, July 29 (Reuters) - Japanese government bonds tumbled on Friday, sending the benchmark 10-year yield to a one-month high, after the Bank of Japan’s steps to ease monetary policy disappointed investors who had hoped measures would include additional bond purchases.

The central bank increased its purchases of exchange-traded funds but kept its base money target at 80 trillion yen ($775 billion) and also maintained its pace of purchases for other assets including JGBs.

“That the BOJ did not boost JGB buying appears to be the source of disappointment for the market,” said Makoto Noji, a senior fixed income strategist at SMBC Nikko Securities.

“Raising the JGB buying amount increases the risk of market operation failures and we can see how this could have been a point of contention among the BOJ board.”

The 10-year JGB yield added 10 basis points to minus 0.180 percent, while September 10-year futures skidded 1.34 points to 152.46.

The five-year yield added 10 basis points to a one-month high of minus 0.260 percent.

Data released earlier on Friday underscored the BOJ’s challenge to pull Japan into sustainable inflation. Japan’s core consumer price index fell 0.5 percent in June from a year earlier, compared with economists’ median estimate for a 0.4 percent annual gain. (Reporting by Tokyo markets team; Editing by Subhranshu Sahu)

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