JGB superlong yields ease on strong auction; 10-year clings to BOJ cap


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TOKYO — Superlong Japanese government bond yields declined on Wednesday following strong demand at an auction of 30-year securities and as the Bank of Japan (BOJ) continued with unscheduled purchase operations aimed at keeping yields down.

The 10-year yield, however, clung to the top of the central bank’s policy band for a third straight session amid expectations for further policy tweaks in coming months, with current BOJ governor Haruhiko Kuroda stepping down in March.

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The Bank doubled the allowable range for the 10-year yield to 50 basis points either side of zero in a surprise move last month, and next sets policy on Wednesday of next week.

The 30-year yield dipped 2.5 basis points to 1.625% as of 0550 GMT after earlier rising to 1.67% for the first time since Oct. 25.

The 20-year JGB yield fell 0.5 basis point to 1.335%, after jumping to a October 2014 at 1.365%.

The BOJ conducted unscheduled JGB buying across maturities, a common occurrence since the Dec. 20 policy tweak, but a rarity on auction days.

The purchases failed to pull the 10-year yield off the 0.5% policy ceiling.

Benchmark 10-year JGB futures also fell 15 yen to 145.56.

The five-year yield rose 0.5 basis point to 0.230%, although the two-year yield was flat at 0.025%.

“At least for the time being, meaning the next couple of months, the speculation that the BOJ under a new governor could change policy further will keep upward pressure on JGB yields, so the BOJ will have keep buying large amounts of JGBs to defend the current policy range,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management. (Reporting by Kevin Buckland; editing by Uttaresh.V)


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