June 7, 2019 / 5:59 AM / 3 months ago

Long-dated JGB yields hit 3-year low on BOJ's less-than-expected reduction

TOKYO, June 7 (Reuters) - Long-dated Japanese government bond yields dropped to a near three-year low on Friday after the Bank of Japan reduced buying in long maturities, but the reduction was less than expected.

The 30-year bond yield fell 8.5 basis points this week, its biggest weekly fall since the Bank of Japan started its “yield curve control” policy in September 2016, as investors rushed to buy long-dated bonds on expectations of U.S. rate cuts.

The 30-year yield briefly lost four basis points to hit its lowest since late August 2016, at 0.365%. The yield was last down three basis points at 0.375%.

As the BOJ keeps the 10-year JGB yield around zero percent, while keeping short-term rates at negative levels, many investors buy only longer-dated bonds, such as 30-year paper.

The BOJ offered to buy a total of 240 billion yen ($2.2 billion) of JGBs with more than 10 to 40 years to maturity, on its first such operation this month.

The central bank said it would buy those bonds only thrice in June, compared with four times per month for the past six months.

The purchase suggested its total buying this month is likely to be about 720 billion yen, compared with 800 billion yen in the previous month.

The benchmark 10-year JGB yield was flat at minus 0.125%, hovering close to its lowest since early August 2016.

The 20-year yield shed 1.5 basis point to 0.245%, while the 40-year yield slipped one basis point to 0.440%.

Ten-year JGB futures ticked down 0.02 point to 153.49 with a trading volume of 40,3477 lots by mid-afternoon trade.

$1 = 108.45 yen Reporting by Tokyo Markets team, Editing by Sherry Jacob-Phillips

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