TOKYO May 22 Fears that the Bank of Japan is
scaling back its massive bond buying programme rippled through
corporate bond markets on Monday as traders rushed to dump their
holdings at an auction, pushing yields to a 1-1/2 year high.
Sellers offered 403 billion yen ($3.62 billion) in Monday's
corporate bond auction, more than four times the amount the
BOJ's 100 billion yen purchase.
That sent the average yield to 0.014 percent and the stop
rate to 0.009 percent, the first time both yields turned
positive since the BOJ started its negative interest rate policy
in early 2016.
Yields at the BOJ operation have edged higher since March,
when traders began dumping corporate bonds on fears the BOJ
would buy less of them at negative yields.
While Japan's central bank has for long held that any talk
of an exit from its four-year-old quantitative easing policy is
premature, there have been subtle changes this year. The BOJ,
has for example, gradually reduced the pace of its bond buying.
Monday's auction makes it three months in a row where
sellers have offered more than four times the amount of
corporate bonds than what was purchased. Before that, the ratio
had never exceeded three times.
Some market players welcome the development as a return to a
more normal market from one that was distorted by the BOJ's
"This is a signal that the corporate bond market is coming
back to more normal conditions," said Toshiyasu Ohashi, chief
credit analyst at Daiwa Securities.
Because the BOJ buys corporate bonds with maturity of up to
three years, many companies have issued three-year bonds with
near zero percent yield. On Friday, Nidec Corp issued
three-year bonds at a yield of 0.0003 percent.
"In the past, there had been a lot of three-year bond issues
around zero percent on the assumption that the BOJ will buy
them. So some people must be holding a heavy position now," said
Jun Fukashiro, head of global strategy investment at Sumitomo
Mitsui Asset Management.
($1 = 111.38 yen)
(Reporting by Hideyuki Sano; Editing by Randy Fabi)