Kevin Buckland
TOKYO (Reuters) – Yields on benchmark 10-year Japanese government bonds eased on Thursday as the market welcomed new supply at its highest coupon since December 2014.
Futures also rose as traders said the 10-year note auction had a “smooth” outcome. The Ministry of Finance raised the coupon to 0.5% from his 0.2%, matching a new policy cap set by the Bank of Japan to control the yield curve in a surprise hawkish adjustment last month.
An overnight drop in U.S. Treasury yields added to the pressure.
The 10-year Treasury yield fell 3 basis points to 0.425% by 0546 GMT.
The benchmark 10-year JGB futures rose by 0.26 yen to 145.67, rebounding from Wednesday’s eight-year low of 145.26.
However, the yield on the 9-year 10-year bond is 0.539%, well above the BOJ’s policy limit, having previously reached 0.556%.
In a client note entitled “Japan: Never Be Fooled Again,” a Jefferies analyst said, “On the surface, everything seems calm, but a sense of hopelessness has set in Japan’s sovereign bond market as the BOJ is surrounded by sellers. dominates the
“When ‘Mr. Market’ sniffs out that policy makers are in a corner, the crawl peg is notoriously difficult to execute.”
The Bank of Japan on Thursday proposed lending 2 trillion yen of two-year government bonds at a fixed interest rate of 0% against pooled collateral, announcing such an operation for the second day in a row, and the amount proposed on Wednesday. was doubled.
However, the central bank announced an unscheduled government bond buying operation for the first time in five days.
The 20-year Treasury yield fell by 1 basis point to 1.330%.
The 30-year yield remained flat at 1.645%, while the 5-year yield fell 0.5 basis points to 0.215%.
The 2-year government bond did not trade and last yielded 0.025%. (Reporting by Kevin Buckland, Editing by Vinay Dwivedi)
