JGBs firm as investors await BOJ’s January purchase plans

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

Japanese government bonds firmed on Thursday, getting a lift from stronger US Treasuries, as investors geared up for the long New Year’s holiday and awaited details of the Bank of Japan’s purchase plans for next month.

The benchmark 10-year yield edged down 1 basis point (bp) to 0.045 percent, while 10-year JGB futures ended up 0.31 point at 150.25.

A well-bid 5-year US note auction on Wednesday helped push benchmark US Treasury yields to their lowest levels in two weeks.

On Friday evening, the BOJ will release the details of its bond buying operations for January. Many analysts and market participants expect no major change to the central bank’s operational purchases, though some said adjustments cannot be ruled out as the BOJ could reduce its buying in line with expected lower issuance.

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 last week.

Under its policy framework adopted in September, the BOJ guides the 10-year government bond yield around zero percent.

One of the BOJ’s board members was quoted as saying at this month’s rate review that the bank should be flexible about raising its bond yield target and allow long-term interest rates to increase if such moves reflected improvements in the economy, according to a summary of opinions at the December 19-20 meeting released on Thursday.

“I am opposed to setting the 10-year bond yield target around zero percent, and believe the yield curve should be allowed to steepen a bit more,” the board member said.



Category: Japan

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