April 27, 2020 / 5:55 AM / a month ago

JGBs gain after BOJ expands stimulus, superlongs soft with investors on sidelines

TOKYO, April 27 (Reuters) - Japanese government bond prices erased early losses to gain on Monday after the Bank of Japan expanded its monetary stimulus, boosting expectations for more government bond purchases.

The BOJ increased its purchase of corporate debt, such as commercial paper and corporate bonds, and also said it would buy JGBs more aggressively.

“The BOJ comments on JGB purchase are boosting expectations that it will increase the size of its JGB purchase tomorrow,” a trader at a Japanese brokerage said.

The BOJ is scheduled to buy one- to ten-years bonds on Tuesday.

Benchmark 10-year JGB futures rose 0.10 point to 152.81, bouncing back from fall to 152.54.

In the cash bond market, the 10-year JGB yield fell 1 basis point to minus 0.035%. The five-year yield fell 0.5 basis point to minus 0.160%.

The two-year JGB yield fell 0.5 basis point to minus 0.175%.

But while short-term players bought back the futures and maturities up to about 15 years, real-money investors stayed on the sidelines, leaving longer maturities fragile.

The 20-year JGB yield rose 0.5 basis point to 0.310%, while the 30-year JGB yield rose 1 basis point to 0.425%.

The 40-year JGB yield rose 0.5 basis point to 0.430%.

The BOJ also scrapped its long-obsolete JGB buying target to increase the JGB holdings by 80 trillion yen ($745.85 billion)per year.

The central bank now buys a far smaller amount, with the annual increase in its JGB holdings dropping to as low as 14 trillion yen earlier this year.

The BOJ has been slowing the pace since the central bank adopted the yield curve control policy to peg the 10-year JGB yield around zero percent in September 2016. ($1 = 107.2600 yen) (Reporting by Hideyuki Sano; Editing by Aditya Soni)

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