Sovereign bonds climb as BOJ maintains policy

Sydney

SOVEREIGN bonds climbed across the world as the Bank of Japan (BOJ) pledged to keep its ultra-loose monetary policy in place and after underwhelming data from China. Stocks were mixed as earnings season rumbled on.

Treasuries and European government bonds rose alongside Japanese debt as the BOJ tweaked some policies but signalled that interest rates will stay low for an "extended period of time". The Stoxx Europe 600 Index drifted even as the likes of BP and Credit Suisse reported positive earnings. Futures on the S&P 500, Dow and Nasdaq all pointed to a slightly higher open before Apple's results.

The BOJ left its key interest rates unchanged while announcing policy tweaks, including reducing the amount of bank reserves subject to its negative interest rate and forward guidance for policy rates. In relation to the long-term rate, the BOJ reiterated that it will buy Japanese government bonds (JGBs) to keep the 10-year yield at about zero per cent.

The next big monetary policy events this week include decisions from the Federal Reserve and Bank of England. Investors will look for further confirmation that US policy makers plan two more interest rate hikes before the end of this year, while their British counterparts are widely expected to increase borrowing costs.

The yield on 10-year Treasuries declined two basis points to 2.95 per cent, the lowest in a week on the biggest fall in more than a week.

Germany's 10-year yield dipped two basis points to 0.42 per cent, the largest dip in almost six weeks.

Britain's 10-year yield declined two basis points to 1.343 per cent, the biggest fall in more than a week. BLOOMBERG