January 30, 2018 / 6:54 AM / a year ago

JGB 10-yr yield at 6-1/2 mth high as ECB exit speculation hits global bonds

TOKYO, Jan 30 (Reuters) - Japanese government bond prices dropped on Tuesday, with the benchmark 10-year yield hitting a 6 1/2-month high of 0.095 percent after European bond yields jumped on expectation of an end in the European Central Bank’s stimulus.

As strong global economic growth intensifies expectations that central banks worldwide will scale back stimulus, the Bank of Japan’s unorthodox policy to peg the 10-year yield “around zero percent” is increasingly coming under pressure.

“There is a consensus among domestic market players that the Bank of Japan is nowhere near an exit from its stimulus. But when markets are starting to price in the ECB’s exit, investors will also think the BOJ will be the only one that has yet to do so,” Yusuke Ikawa, strategist at BNP Paribas

Dutch central bank chief Klaas Knot said on Sunday he ECB should make clear that it will end its asset purchases after the current bond buying programme ends in September, helping lift the 10-year German bund yield to a one-year high of 0.644 percent.

The latest rise in the 10-year yield puts the BOJ in a difficult position. Whenever the yield rose or threatened to rise above 0.1 percent in the past, the central bank has offered unlimited buying at the yield of 0.11 percent.

Some market players think the BOJ could take such an action soon if the yield rises further.

But analysts also say bringing down the yield ahead of Thursday’s 10-year JGB auction will not be welcomed by investors.

The 10-year yield last stood at 0.090 percent , after having risen to 0.095 percent, its highest since July 11.

The 20-year bond yield rose 2.0 basis points to 0.595 percent while the 30-year yield rose 1.5 basis points to 0.820 percent.

The 10-year JGB futures price dropped 0.14 point to 150.17.

The short end of the market was firmer after solid results of two-year JGB auction on Tuesday. It attracted bids 5.02 times the offer, up from bit-to-cover of 4.32 the previous month.

The two-year yield was flat at minus 0.130 percent . (Reporting by Tokyo Markets Team; Editing by Vyas Mohan)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below