Japanese government bond 10-year yield hits near-decade high, BOJ steps in
THE Bank of Japan (BOJ) stepped in the market on Monday (Sep 11), after a report flagging a possible early end to the central bank’s negative rate policy pushed Japanese government bond (JGB) yields higher across maturities.
The 10-year JGB yield jumped six basis points (bps) to 0.705 per cent, hitting its highest since January 2014.
The sharp rise in the yield came as investors reacted to BOJ governor Kazuo Ueda’s interview with the Yomiuri newspaper, published on Saturday, in which he said the central bank could end its negative interest rate policy when its 2 per cent inflation goal is in sight, indicating possible rate hikes by year-end.
On Monday, the BOJ said it would offer five-year loans against collateral to banks, in the first such operation since February. The move is intended to encourage investors to buy five-year bonds with loans carrying lower rates. The five-year bond yield jumped 7 bps to 0.285 per cent, its highest since Jan 18.
The announcement by the BOJ, however, has so far failed to push yields down from the highs reached in the Asian morning.
“Such a reaction suggests market participants are still concerned that the BOJ will move forward earlier than expected (with) monetary normalisation,” including ending negative interest rate policy, said Ryutaro Kimura, fixed-income strategist at AXA Investment Managers.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The loan duration has been set between Sep 15 this year and Sep 15, 2028, the central bank said. Details of the terms are to be set later.
The BOJ, so far an outlier among hawkish global central banks, tweaked its yield curve control policy late in July to allow the 10-year yield to move as far as 1 per cent. However, fears of emergency bond-buying operations by the central bank kept the yield around the mid-0.6 per cent range until Monday.
The BOJ typically contains elevated yields also through offering low-rate loans to boost amounts for its regular bond-buying. The 20-year JGB yield sat 6 bps higher at a seven-month peak of 1.455 per cent. The 30-year JGB yield rose 4.5 bps to a nearly 10-year high of 1.71 per cent.
On the short end, the two-year JGB yield rose 4 bps to 0.04 per cent, its highest level since Jan 13.
Share with us your feedback on BT's products and services
