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JGBs drop on weak results after BOJ, U.S. tax plan vigil
September 27, 2017 / 6:58 AM / 3 months ago

JGBs drop on weak results after BOJ, U.S. tax plan vigil

TOKYO, Sept 27 (Reuters) - Japanese government bonds slipped on Wednesday as buying operations by the Bank of Japan drew strong selling interest from investors, who were bracing for the announcement of a tax plan from U.S. President Donald Trump.

The yield on the 10-year JGB rose 2.5 basis points to 0.050 percent, the highest since mid-August.

The price of the benchmark 10-year JGB futures dropped to close at a six-week low of 150.58, falling 0.22 point.

The 20-year bond yield rose 2.0 basis points to 0.570 percent, while the 30-year yield gained 1.5 basis points to 0.850 percent.

Traders were keen to sell bonds partly because it has been 12 days since the BOJ bought bonds in those maturities, much longer than usual, they said.

The BOJ’s purchase of 10-25 year maturities drew selling at 3.71 times the amount of the central bank’s purchases, the highest ratio this month.

The average accepted yield was 0.6 basis point above the previous close, also the weakest result so far this month.

Market players also refrained from buying as they waited for a tax plan the U.S. administration and Republicans in Congress are due to unveil later on Wednesday.

Sentiment also took a hit after Federal Reserve Chair Janet Yellen said the Fed would need to continue with gradual interest rate increases despite soft inflation.

The JGB market has so far shown limited reaction to Prime Minister Shinzo Abe’s plan to call a snap election as well as to his new spending plan that will make it all but certain for Japan to meet its fiscal reform target.

The BOJ’s heavy buying of JGBs is numbing investors’ sense of caution on the poor fiscal condition of the Japanese government. (Reporting by Tokyo Markets Team; Editing by Biju Dwarakanath)

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