Japan's 10-year yields fall from BOJ's target rate

JAPAN'S 10-year government bond (JGB) yields fell from the limit of the Bank of Japan's policy band on Wednesday (Jul 6), tracking US Treasury peers lower amid fears for economic slowdown.

The 10-year JGB yield fell 0.5 basis point to 0.245 per cent, after scaling 0.25 per cent, the upper limit of the Bank of Japan's (BOJ) policy band, on Tuesday.

The yield fell also as the central bank sticks to its ultra-low interest rate policy and vowed to defend its cap on the 10-year bond yield with unlimited buying of bonds, an effort that some analysts describe as distorting market function.

While the policy bucks global wave of monetary tightening, there is a speculation that the BOJ would adjust its policy eventually.

In a sign that the market expects the policy shift, some investors made a bid to buy 10-year bonds at 0.25 per cent at an auction held on Tuesday, the highest bid since 2016, according to data released by the Ministry of Finance.

The move suggests that investors attempted to buy the bonds cheap at an auction to sell them to the Bank of Japan at profits.

"Their bid could have been higher than 0.25 per cent to gain more profits, but it did not exceed that level," said Takafumi Yamawaki, head of Japan rates research and markets division at JP Morgan Securities.

Yields on other notes also fell, with the 20-year JGB yield retreating 1 basis point to 0.890 per cent and the 30-year JGB yield falling 2.5 basis points to 1.260 per cent.

The 40-year JGB yield fell 2 basis points to 1.385 per cent.

The 2-year JGB yield fell 0.5 basis point to -0.070 per cent.

The 5-year yield fell 0.5 basis point to 0.005 per cent.

Benchmark 10-year JGB futures rose 0.41 point to 149.37, with a trading volume of 14,307 lots. REUTERS