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JGBs steady as market ponders BOJ member's easing signal

[TOKYO] Japanese government bonds were steady on Tuesday, with the superlong end edging higher and the yield curve slightly flattening, as the market mulled over a Bank of Japan (BOJ) policymaker's idea that the central bank should guide 15-year bond yields lower.

The benchmark 10-year cash JGB yield was flat at 0.065 per cent, while the 10-year JGB futures contract ended up 0.03 point at 150.47.

The 30-year JGB yield as well as the 40-year JGB yield both inched down half a basis point to 0.865 per cent and 1.065 per cent, respectively.

The BOJ kept monetary policy steady as expected and roughly maintained its ambitious price forecasts on Tuesday, pointing to signs of growing strength in the economy.

Market voices on:

Board newcomer Goushi Kataoka dissented to the decision to stand pat. While he made no explicit proposal on additional easing, he said the BOJ should buy government bonds, so 15-year yields "remain at less than 0.2 per cent".

The yield on the 15-year government bond - which traders rarely quote as a benchmark - stood around 0.307 per cent on Tuesday.

"I guess his thinking is that the yield curve should be flatter in order to achieve 2 per cent inflation," said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

"Maybe he thinks that if the superlong end of the curve declines, that would stimulate corporate investment activities?" she said. "But he might have a different angle in mind."

Mr Kataoka's opinion is unlikely to be in the majority at least as long as BOJ governor Haruhiko Kuroda remains at the central bank's helm, she added.

Mr Kuroda is scheduled to hold a news conference at 0630 GMT to explain the BOJ's policy decision.