TOKYO, March 21 Japan's Ministry of Finance is
considering shortening the period between the auction and the
issuance of some Japanese Government Bonds, sources with
knowledge of the matter said, a move that is expected to reduce
risk for bond brokers.
JGB brokers have long wanted such a step because the Bank of
Japan, by far the largest buyer of JGBs because of its massive
bond purchase scheme, does not accept the bonds that have been
auctioned but are yet to be issued, compelling brokers to hold a
large number of bonds over the interim period.
The BOJ buys bonds in the secondary market and not at
auction to avoid directly monetising Japanese government debt.
The proposed shortening of issue times would come as market
players grow more wary of the growing risks of holding bonds.
Global bond prices have come under pressure partly because
the U.S. Federal Reserve is raising interest rates and also
because the European Central Bank is on course to scale back its
bond-buying stimulus campaign.
The MOF plans to bring forward the issue date of all the
JGBs that are currently issued more than two business days after
That includes the JGBs that are issued in March, June,
September and December as well as all two-year bonds. Some of
them are issued weeks after auction.
That means brokers are burdened with considerable risk,
given that in many cases there are few buyers except the BOJ --
because BOJ policy has kept yields too low.
Since the BOJ started massive easing in 2013, many bond
traders have been engaged in the so-called BOJ trade, in which
they buy JGBs at the MOF auction and flip them to the BOJ very
The Ministry plans to float the idea in an upcoming meeting
with market players this week, the sources said.
(Reporting by Takaya Yamaguchi, writing by Hideyuki Sano;
Editing by Eric Meijer)