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JGB yields rise on Kuroda, higher oil price and stimulus doubts
October 11, 2016 / 5:46 AM / a year ago

JGB yields rise on Kuroda, higher oil price and stimulus doubts

TOKYO, Oct 11 (Reuters) - Japanese government bond yields rose on Tuesday, hit by comments from the Bank of Japan chief and as global bond yields increased on higher oil prices and expectations massive stimulus by major central banks may be coming near its end.

The 10-year JGB yield rose 2.0 basis points to minus 0.050 percent, hitting its highest level in nearly three weeks, following a market holiday on Monday.

BOJ Governor Haruhiko Kuroda said on Sunday he does not see the need to ease policy further now and that the central bank’s bond buying could be reduced considerably under its new framework adopted last month.

During the long weekend in Japan, German 10-year Bunds yield rose to a four-week high of 0.065 percent while U.S. 10-year Treasuries yield hit a four-month high of 1.771 percent.

A climb in global bond yields has come as oil prices are rising solidly on expectations that oil-producing countries next month could reach a deal to cut production, lifting inflation expectations.

Brent oil futures hit a one-year high of $53.73 per barrel on Monday after Russia and Saudi Arabia both said a deal between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members such Russia on curbing crude output was possible.

Investors are also getting nervous that additional quantitative easing is becoming increasingly difficult both in Europe and Japan, as they are seen running out of bonds to buy at some stage after massive purchases over years.

European bonds were hit by speculation that the European Central Bank could consider reducing the scale of its asset purchases before the programme finally ends.

The BOJ’s new policy framework, many investors also think, will likely end up leading it to buy a smaller amount of bonds.

The market is also cautious ahead of a 30-year JGB auction on Wednesday.

The 30-year yield rose 2.0 basis points on Tuesday to 0.525 percent, its highest level since Sept 21.

“Investors are not eager to buy ahead of the 30-year JGB auction tomorrow. For now, we expect their buying at the yield around 0.55 percent,” said Naoya Oshikubo, yen rates strategist at Barclays.

The BOJ refrained from conducting bond buying operations on Tuesday, triggering minor disappointment among some traders.

The 10-year JGB futures price fell 0.19 point to 151.80 . (Reporting by Hideyuki Sano; Editing by Richard Borsuk)

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