JGB yield curve steepens after BOJ cuts superlong bond purchases
JAPAN’S government bond yield curve steepened on Thursday (Dec 28), as yields on the longest tenors rose in response to a cut in central bank purchases, while shorter-dated yields which tracked their US peers were lower.
The 30-year JGB yield rose 5 basis points (bps) to 1.60 per cent as of 0600 GMT, while the 20-year yield was 1.5 bps higher at 1.345 per cent.
Meanwhile, the 10-year JGB yield fell 1 bp to 0.585 per cent. The two-year yield declined 1 bp to 0.04 per cent and the five-year yield sank 1.5 bps to 0.19 per cent.
The curve, as measured by the spread between two- and 30-year yields, reached 156 bps, its highest in about two weeks.
On Wednesday, the Bank of Japan cut the number of purchase operations per month, targeting bonds with maturities of 10 to over 25 years, in a move that surprised some analysts.
Meanwhile, BOJ Governor Kazuo Ueda gave little hint at an early end to stimulus in an interview with national broadcaster NHK the same day, saying the central bank is in “no rush” to normalise policy.
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In minutes from the policy meeting earlier this month, released on Wednesday, some policymakers called for deeper debate on a future stimulus exit.
However, Mizuho Securities strategists wrote in a report that “the stance of the centrist to dovish committee members – probably including Governor Ueda and his two deputies – is hardly leaning towards the hawkish side.”
At the same time, markets continue to price in a shift to rate cuts by the US Federal Reserve next year.
US Treasury yields held near overnight multi-month lows in Asian hours, with the 10-year yield at around 3.8 per cent. It fell to 3.783 per cent on Wednesday for the first time since July 20.
Benchmark 10-year JGB futures rose 0.22 yen to close at 147.05. Bond yields move inversely to prices. REUTERS
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