April 5, 2017 / 4:53 AM / 4 months ago

Short-dated JGBs firm on BOJ, long bonds dip ahead of auction

2 Min Read

TOKYO, April 5 (Reuters) - The price of short-dated Japanese government bonds rose on Wednesday after the Bank of Japan reduced purchase in those maturities less than expected, while those of longer maturities dipped ahead of an auction the following day.

In its bond-buying operation on Wednesday, the BOJ offered to buy 280 billion yen ($2.53 billion) of one- to three-year JGBs, 20 billion yen less than previous such operations and the lowest level in almost three years.

Many market players still expected a larger reduction as the central bank said it would buy 200 billion yen to 300 billion yen of one- to three-year tenors each time this month, making the middle point of that range, 250 billion yen, a consensus figure.

In addition, the BOJ did not reduce buying in three- to five-year sector, maintaining its purchase at 380 billion yen, compared with the pre-announced target range of 300 billion yen-400 billion yen for this month.

Those surprises helped to underpin short-term bonds, pushing down the two-year JGB yield 1.5 basis point to minus 0.200 percent.

The five-year yield fell 1.0 basis point to minus 0.135 percent.

On the other hand, longer-dated bond prices eased, boosting their yields, ahead of Thursday's auction of long-dated bonds.

The Ministry of Finance plans to sell 500 billion yen of existing 20- and 30- year JGB issues with 15 years or more left to maturity.

The 20-year yield rose 1.0 basis point to 0.645 percent , while the 30-year yield gained 2.0 basis points to 0.875 percent.

The 40-year yield rose 2.5 basis points to 1.090 percent , its highest level since February last year.

The 10-year JGB yield rose 0.5 basis point to 0.065 percent .

The 10-year JGB futures, price of which reflects cheapest to deliver seven-year bonds, rather than 10-year bonds, rose 0.05 point to 150.44.

$1 = 110.61 yen Reporting by Tokyo Markets Team; Editing by Sherry Jacob-Phillips

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