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10-year JGBs steady after BOJ buying, other tenors fragile
February 6, 2017 / 5:40 AM / 10 months ago

10-year JGBs steady after BOJ buying, other tenors fragile

TOKYO, Feb 6 (Reuters) - Yields on 10-year Japanese government bond stabilised on Monday after the Bank of Japan extended buying in that maturities for the second straight day to quell market anxiety about the BOJ’s stance on bond purchases.

The central bank bought 450 billion yen ($4 billion) of bonds with maturity of more than five to 10 years on Monday. The move followed its two separate purchases of the 10-year bonds on Friday.

Although it was not usual for the BOJ to buy the same maturities for two sessions in a row, many market players expected the central bank to do so after Friday’s sell-off.

Overall, the BOJ on Friday bought 450 billion yen of five-to-ten year debt and then offered to buy an unlimited amount of 10-year JGBs at a fixed yield of 0.110 percent when it became clear its earlier operation was ineffective in halting rising yields.

The tactic showed the BOJ was prepared to go the distance to control the yield at its policy target of “around zero percent.”

On Monday, the 10-year yield stood flat at 0.095 percent , moving off Friday’s one-year high of 0.150 percent.

“The market calmed down after a fashion. But it remains fragile,” said Keiko Onogi, senior strategist at Daiwa Securities.

The yields on other maturities, however, rose back as many investors were unsure about the BOJ’s strategy due to its seemingly inconsistent stance in its bond buying operation since late last month.

On Jan. 25, the BOJ surprised markets by skipping a chance to buy short-term bonds, sparking speculation that it may be starting to gradually reduce its bond purchase.

The BOJ has so far not taken any visible steps to halt rises in yields on superlong bonds - 20-year bonds or longer maturities - even though their yields have risen 30-50 basis points since the central bank had introduced the “yield curve control” policy in September.

In Monday’s afternoon trade, the 20-year yield rose 2.5 basis points to 0.710 percent , near 11-month high of 0.730 percent hit on Friday.

The 30-year yield rose 2.5 basis points to 0.890 percent , with investors cautious head of an auction of 30-year bonds on Thursday.

Shorter yields also rose, with five-year yield rising 1.0 basis point to minus 0.090 percent.

The price of 10-year JGB futures dropped 0.14 point to 149.62. ($1 = 112.42 yen) (Reporting by Tokyo Markets Team; Editing Shri Navaratnam)

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