July 25, 2018 / 7:04 AM / 20 days ago

JGBs recover further after BOJ operations see limited selling in super-long bonds

TOKYO, July 25 (Reuters) - Japanese government bond prices gained on Wednesday, with the benchmark futures extending their recovery to a second session, after the Bank of Japan’s operations saw limited selling in the market.

The results of the operations helped to boost super-long bonds, which had been battered this week following reports that the Bank of Japan may be looking to adjust its policy to ease the side effects.

As scheduled, the BOJ on Wednesday conducted buying in three maturity zones, over five to 10 years, over 10 to 25 years and over 25 years, maintaining the size of its purchase from the previous operation in all three categories.

The BOJ’s buying in maturities over 25 years drew selling of just 110.3 billion yen, 1.84 times the BOJ’s buying of 60 billion yen, the lowest so far this year.

The results showed limited selling interest among market players, improving sentiment after sharp falls in 20- to 40-year tenors over the last two sessions.

The 20-year yield had jumped 11 basis points in the previous two sessions, the biggest two-day rise since the introduction of the yield curve control policy in September 2016.

It fell 3.5 basis points to 0.555 percent on Wednesday.

The 30-year JGB yield fell 2 basis points to 0.780 percent, while the 40-year JGB yield declined 2 basis points to 0.920 percent.

“The BOJ could decide at the upcoming meeting that it is going to study ways to make its stimulus sustainable. But it is unlikely to drop a clear hint on what it plans to do, let alone taking action in July,” said Naruki Nakamura, head of investments at BNP Paribas Asset Management Japan.

“We felt that the falls in JGBs over the last two days were excessive and we saw it as a good bargain-hunting opportunity,” he said.

Ten-year JGB futures rose 0.19 point to 150.78, extending their recovery for the second day.

The 10-year JGB yield fell 1.5 basis points to 0.065 percent.

JGBs dived earlier this week on expectations that the BOJ may debate moves to effectively scale back its massive monetary stimulus at its upcoming policy meeting on July 30-31. (Reporting by Tokyo Markets Team; Editing by Subhranshu Sahu)

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