TOKYO, March 24 (Reuters) - Japanese government bond yields ticked up on Friday, led by short-term bills and bonds, after the Bank of Japan acted to ease any shortage of short-term JGBs when the Japanese fiscal year ends on March 31.
The BOJ on Friday sold 1.0 trillion yen of JGBs with a repurchase agreement, its first reverse repo operation in more than eight years, which it announced the previous day.
The BOJ on Thursday also pledged to take other steps, such as making it easier for brokers to use the BOJ’s bond lending facility and skipping its discount bill buying.
These measures, including Friday’s operations, were aimed at temporarily providing brokers with JGBs they need to tide them over to March 31, the end of fiscal year, when the shortage of government paper is expected to be the most acute.
Following the operation, JGB repo rates bounced back sharply, with one-month repo rate rising to minus 0.123 percent from minus 0.280 percent on Thursday.
That had knock-on effects on JGB yields.
The three-month government bill yield rose 3.2 basis points to minus 0.310 percent while the two-year yield rose 1.0 basis point to minus 0.265 percent.
The five-year yield rose 2.0 basis points to minus 0.145 percent, giving up their gains during the last two sessions.
“People who had been holding long positions based on the assumption that there would be severe shortage of short-term paper towards the fiscal year-end were dumping today,” said a trader at a Japanese brokerage.
The market also took a cue from the rise in Japanese share prices and the dollar/yen, both of which tend to lessen inflows to low-yielding bonds.
The 10-year JGB yield rose 1.5 basis point to 0.065 percent. The price of the benchmark 10-year JGB futures dropped 0.09 point to 150.39.
The 20-year yield rose 0.5 basis point to 0.645 percent while the 30-year rose to 0.835 percent .
BOJ Governor Haruhiko Kuroda, speaking at a Reuters Newsmaker event, said he did not think the BOJ would be forced to raise its bond yield target just because yields on foreign bonds were rising. (Reporting by Hideyuki Sano, additional reporting by senior IFR analyst Takahiro Okamoto; Editing by Eric Meijer)