Japan MOF to reduce issuance of most JGB maturities in 2017/18

23-Dec-2016 Intellasia | Reuters | 6:00 AM Print This Post

Japan plans to trim the issuance of Japanese government bonds of up to 20 years to maturity during the fiscal year starting April 1 in reaction to soft demand for negative- or low-yielding bonds, the Ministry of Finance said on Thursday.

The finance ministry is reducing the overall JGB sales through auction to 141.2 trillion yen ($1.20 trillion), down from 147 trillion yen ($1.25 trillion) in the current year and the lowest in seven years, due to reduced borrowing needs for the next fiscal year.

That allows the ministry to cut the issuance of most maturities except for the longest end of the yield curve, such as 30- and 40-year bonds.

Investor demand for those superlong bonds is strong given that their yields remained positive even after those on shorter peers dropped below zero as the Bank of Japan introduced negative rates in early 2016.

Demand for short-term notes, such as two-year and five-year bonds, is weak because of their negative yields.

The MOF plans to reduce the sales of 10-year JGBs per auction to 2.3 trillion yen from 2.4 trillion yen at present. That would be the first time it has reduced the 10-year bond offer since 1999.

The details of the MOF’s JGB issuance plan for 2017 are as follows.

Maturity Planned issue Frequency annual total per auction (trln yen) —————- 40-year 0.5 (0.5*) bi-monthly 3.0 (2.8*) 30-year 0.8 (0.8) monthly 9.6 (9.6) 20-year 1.0 (1.1) monthly 12.0 (13.2) 10-year 2.3 (2.4) monthly 27.6 (28.8) 5-year 2.2 (2.4) monthly 26.4 (27.6) 2-year 2.2 (2.3) monthly 23.8 (25.0) Infl-linked 0.4 (0.4) quarterly 1.6 (1.6) Re-offers** – - 10.8 (9.6) 1-yr TBs *** monthly 23.8 (25.0) —————- Total 141.2 (147.0) -The numbers in brackets are the figures for the current fiscal year to March.

-*The issuance of 40-year bonds was increased to 500 billion yen per auction from 400 billion yen in September.

-**The Ministry of Finance re-offers existing JGBs through “auctions for enhanced liquidity”. The MOF says it will set the details after consultations with market players. The MOF typically holds this type of auction twice a month now.

-***One-year discount bills will be combined with one-year financing bills when they are issued. The MOF plans to sell 2.3 trillion yen of one-year discount bills next fiscal year, compared to 2.5 trillion yen in the current year.

($1 = 117.60 yen)



Category: Japan

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