February 9, 2018 / 7:13 AM / 3 months ago

JGBs rise on stock market rout, 40-yr yield hits 1-yr low

TOKYO, Feb 9 (Reuters) - Japanese government bonds gained on Friday, with the 40-year yield hitting a one-year low as a global equities sell-off raised the allure of fixed-income products and undermined any talk of the Bank of Japan seeking an exit from stimulus.

The 10-year JGB yield dipped 0.5 percent to 0.070 percent while the 20-year yield dropped 1.0 basis point to 0.580 percent. The price of the 10-year JGB futures rose 0.08 point to 150.50.

The 40-year JGB yield dropped 1.5 basis points to 0.935 percent, its lowest since January last year.

Japan’s Nikkei share average fell 2.3 percent to a four-month closing low as worries about higher bond yields and tighter monetary policy around the world hit global stocks.

“The sell-off in stock market is also raising questions about the very assumption that the BOJ may be adjusting its monetary policy,” said Naomi Muguruma, senior strategist at Mitsubishi UFJ Morgan Stanley Securities.

Although global bond prices are coming under pressure on worries about inflation, the Japanese bond market has hardly flinched as the Bank of Japan last week offered unlimited buying of 10-year bonds at a yield of 0.11 percent, to clamp down on any challenges against its policy to control the yield around zero percent.

The BOJ action also crushed the volatility in JGBs. S&P-JPX JGB Vix, which measures the volatility that market players expect, has fallen below 1.5 this week, the lowest level since December, and not far from a record low of 1.30 touched last year. (Reporting by Hideyuki Sano; Editing by Sunil Nair)

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