December 28, 2016 / 3:59 AM / 7 months ago

UPDATE 1-Longer JGB yields rise as BOJ adjusts buying operation

3 Min Read

* Yield curve steepens as BOJ slightly trims longer JGB purchases

* Adjustment returns buying levels to previous levels-BOJ official

* Market awaits details of BOJ's Jan JGB buying plans on Friday

TOKYO, Dec 28 (Reuters) - Benchmark Japanese government bonds edged up on Wednesday in the waning days of the year, while prices of longer maturities fell as the Bank of Japan slightly reduced its bond-buying in that zone.

A senior BOJ official said the buying adjustment marked a return to the status quo, after the central bank increased its purchase amounts earlier this month to address rising yields.

"After the increase in the middle of this month, taking into consideration the fact that the sudden rise in interest rates has stopped and they have stabilized, we returned the level of buying to where it was before the increase," the official said.

The BOJ offered to buy 110 billion yen ($935.22 million) of JGBs with over 25 years left to maturity and 190 billion yen of JGBs with between 10 and 25 years left to maturity.

On Dec. 14, the BOJ had offered to buy 120 billion yen of JGBs with over 25 years left to maturity, and 200 billion yen of JGBs with between 10 and 25 years left to maturity.

A BOJ official had said the Dec. 14 increase was aimed at steering the JGB yield curve toward what the central bank deems appropriate, and that the move took into account recent rapid rises in super-long yields and the possibility of further volatility.

On Friday evening, ahead of the Japanese New Year holiday, the central bank will release the details of its bond buying operations for January.

"It's getting more difficult for us to predict how the BOJ will behave, and the timing," said Keiko Onogi, senior strategist at Daiwa Securities.

"We'll have the BOJ's announcement for next month's purchases on Friday. I expect the BOJ to keep its purchase pace," she said.

The benchmark 10-year yield edged down 0.5 basis point (bp) to 0.055 percent, while 10-year JGB futures ended up 0.12 point at 149.94.

The yield curve steepened as longer maturities pulled away from session lows and climbed in afternoon trading.

The 20-year yield added 2.5 bps to 0.595 percent, its highest since Dec. 19, up from a session low of 0.565 percent. The 30-year yield rose 3.5 bps to 0.715 percent, its highest since Dec. 16, from a session low of 0.670 percent.

Minutes of the BOJ's rate review on Nov. 1 released earlier this week showed BOJ policymakers disagreed on how much emphasis the central bank should place on the size of its bond purchases under its new policy framework targeting interest rates.

Some board members insisted the BOJ continue to offer guidance because deleting it could send "a wrong signal to markets" by making it appear as if it was considering tapering its asset purchases, the minutes showed. ($1 = 117.6200 yen) (Reporting by Tokyo markets team; Editing by Richard Borsuk and Eric Meijer)

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