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JGBs edge up after BOJ keeps policy rates steady
December 20, 2016 / 5:44 AM / a year ago

JGBs edge up after BOJ keeps policy rates steady

TOKYO, Dec 20 (Reuters) - The prices of Japanese government bond ticked up on Tuesday after the Bank of Japan kept its policy steady, a move that appears to set it apart from the other central banks that are scaling back stimulus.

The BOJ maintained its twin targets of minus 0.10 percent interest on some excess reserves and the zero percent 10-year government bond yield.

Although such an outcome was widely expected, there was speculation that the BOJ could indicate it could raise its target in the 10-year JGB yield in light of big rise in global bond yields and higher growth expectations in the United States.

The 10-year JGB yield dipped 0.5 basis point to 0.070 percent, slipping further from Friday’s 10-1/2-month high of 0.100 percent.

The 30-year yield dropped 2.0 basis points to 0.675 percent , easing from 0.805 percent hit a week ago, while the 20-year yield dipped 1.5 basis points to 0.575 percent from last week’s 0.650 percent.

Yields on superlong maturities such as 20- and 30-year bonds started to decline after the BOJ increased its buying in those sectors last Wednesday.

Many market players still think Japanese bonds could come under renewed pressure if the U.S. bond yields and the dollar rise further on expectations of President-elect Donald Trump’s economic policies.

The U.S. Federal Reserve indicated it could raise rates three times next year after it hiked its rates earlier this month, while the European Central Bank announced it will reduce its bond purchase from April.

Many analysts now expect the BOJ to raise its target for the 10-year JGB yield some time next year.

“At the moment, two percent inflation is nowhere near sight so they will have to keep rates on hold but they could have some justifications for moving up the 10-year yield based on developments in foreign markets,” said Naoya Oshikubo, yen rates strategist at Barclays. (Reporting by Hideyuki Sano; Editing by Sherry Jacob-Phillips)

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