October 31, 2019 / 4:48 AM / 19 days ago

JGBs retain gains after BOJ stands pat on monetary policy

TOKYO, Oct 31 (Reuters) - Japanese government bond prices held on to gains on Thursday after the Bank of Japan (BOJ) kept its policy targets unchanged and tweaked its forward policy outlook, benefiting from a rally in U.S. bonds following a Federal Reserve rate cut.

The BOJ kept its policy targets in short-term interest rates and 10-year bond yields unchanged, at minus 0.10% and 0% respectively, and modified its forward outlook.

However, the impact was negligible as the announcement hardly did anything to the perception that the BOJ will have no choice but to keep dovish talks given its limited policy ammunitions.

“No one has high expectations on what the BOJ policy can do. The market was driven by Fed’s move,” said Yuuki Fukumoto, researcher at NLI Research.

In early afternoon trade, benchmark 10-year JGB futures were up 0.06 point at 153.83.

The 10-year JGB yield fell 0.5 basis point to minus 0.130%, while the 20-year JGB yield dropped 1.5 basis points to 0.235%.

The 30-year JGB yield dipped 1 basis point to 0.400%.

At the shorter end, the two-year JGB yield fell 1 basis point to minus 0.230%.

On Wednesday, U.S. bond prices rallied after the Federal Reserve cut interest rates for the third time this year even though it also signalled there would be no further reductions unless the economy takes a turn for the worse.

Reporting by Tokyo Markets Team, Editing by Sherry Jacob-Phillips

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