TOKYO (Reuters) – Japan’s new 10-year government bond yield rose to 0.5%. The Bank of Japan widened the allowed variation range of long-term interest rates on December 20, 2018, but it appears to have reached the “upper limit” in about two and a half weeks. In the market, unless foreign interest rates fall suddenly, there is a view that the BOJ attack, where foreign investors continue to intermittently sell yen bonds, will happen again.
In the Japanese government bond market (JGB) on the 6th, the 369th 10-year bond became the benchmark issue for long-term interest rates. The yield quickly reached 0.5%, the upper limit of the Bank of Japan’s (YCC) Yield Curve Control.
Kazuya Sato, a fixed-income strategist at Daiwa Securities Co., said he believes the fierce battles seen in June and October last year are likely to happen again. “There is also the possibility of another stalemate before the BOJ meeting on the 17th and 18th. Basically, the BOJ will be able to trigger all kinds of operations to hold back, but it is likely that the battle between selling and buying continues. for some time. Isn’t there?”
Japan’s government bond yield curve (interest rate curve) continues to have a distorted shape with a dent around 9 to 10 years even after widening the allowed variation range, indicating that it is relatively expensive. The Bank of Japan has been buying temporary government bonds and two-year common collateral operations every day in an effort to curb interest rate rises, but investors say they are maintaining an underweight position.
A director of fixed income at a major US asset management firm said there is no incentive for investors to buy aggressively at 0.5% in a situation where the risk of long-term interest rates rising towards 0.75% or 1% is more than falling . Note that there is nothing special. “With wage increases of more than 3% mainly in large companies, rising inflation and the benefits of China’s economic resumption, the Japanese economy is not looking bad this year. There is a possibility that the interest rate will rise.”
Regarding the December policy review, BOJ Governor Haruhiko Kuroda explained that it was “not at all a step towards an exit”, but because it was surprising that communication with the market was insufficient, “many market participants were skeptical . It is,” he said. domestic securities sales representative.
Matsuzawanaka, chief macro strategist at Nomura Securities, said the BOJ had opened Pandora’s box. “Based on the logic of December, if the market is speculating about further policy reforms, the volatility may widen further. I wonder if it was.”
(Edited by Tomoko Uetake: Daiki Iga)
