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Japanese Govt. Bonds pare losses after BOJ decides to buy “unlimited” long-term bonds to curb rising yields

Japanese Govt. Bonds pare losses after BOJ decides to buy “unlimited” long-term bonds to curb rising yields

Japanese government bonds pared losses Friday after the Bank of Japan (BoJ) announced early today that it would buy an “unlimited” amount of long-term bonds to curb the effect of rising yields.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1 basis point to 0.08 percent, the yield on the long-term 30-year note remained tad lower at 0.82 percent and the yield on short-term 2-year traded 1/2 basis point lower at -0.12 percent by 05:45 GMT.

It was the first time in more than six months that the BoJ has conducted special operations to buy bonds to achieve the yields it wants to see, rather than the auctions used in regular operations – a powerful show of force to direct the market. On top of that, the BoJ increased the amount of its planned buying in five- to 10-year JGBs to JPY450 billion from the JPY410 billion amount it has favoured since late August.

Investors have started to speculate that the BOJ could also be moving towards an exit from ultra-easy policy, although BOJ Governor Haruhiko Kuroda has denied that he was considering such a major policy adjustment in the near future, Reuters reported.

Meanwhile, the Nikkei 225 index fell 0.85 percent to 23,268.50 by 05:50 GMT, while at 05:00GMT, the FxWirePro’s Hourly JPY Strength Index remained highly bearish at -149.22 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend).

Source: FXWire Commentary

 

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