BOJ survey shows bond dealers feel market functioning impaired

[TOKYO] The majority of Japanese government bond dealers think that the bond market is not functioning well and that bid-ask spreads are not very tight, a Bank of Japan survey showed on Monday.

The BOJ surveyed 40 financial institutions that are eligible to participate in JGB market operations, in order to better understand how its purchases of government debt via its quantitative easing are impacting the market.

Of institutions surveyed, 65 per cent said the bond market is not functioning at a very high level, while 62.5 per cent said the difference between bid and ask prices is not very tight.

The survey also showed that 55 per cent of firms said orders from their customers are not very large.

The BOJ said last year in November it would conduct a new survey of bond investors to improve market communication after it expanded its quantitative easing in the previous month.

The BOJ's government debt purchases under its quantitative easing are so large that some economists have said this crowds out institutional investors and impairs the functioning of the bond market.

REUTERS