The 10-year JGB futures jumped 1.09 points to close at 146.15. Yields on both the 20-and 30-year JGBs fell 7.5 bps. (Reporting by Junko Fujita; Editing by Sonia Cheema, Savio D'Souza and Janane Venkatraman)
(Updates yield movements)
By Junko Fujita
TOKYO, March 10 (Reuters) - Japanese government bond
(JGBs) yields fell sharply on Friday after the Bank of Japan
(BOJ) maintained its policy, as short sellers raced to close
their positions by buying back bonds.
The yield on the 368th 10-year bonds fell to negative
0.035%. The benchmark 10-year bond yield fell
11.5 basis points (bps) to 0.385%, its lowest since Jan. 24 in
its deepest decline in seven years.
The BOJ maintained ultra-low interest rates and held off
from making changes to its controversial bond yield control
policy.
The move defied some expectations of a policy tweak, as
pressure is building on the BOJ's stance with inflation picking
up and large employers lifting wages.
These expectations, in some quarters, included the BOJ
widening the trading band of the benchmark 10-year yield further
or shifting its yield target to a shorter duration.
"Investors needed to buy back bonds as they cannot afford to
keep their short positions," said Masayuki Koguchi, general
manager at the fixed income investment division of Mitsubishi
UFJ Kokusai Asset Management.
Last month, the central bank quadrupled the minimum fee
charged to financial institutions for borrowing some 10-year
bonds and reduced the maximum amount for lending, a move to
deter market players from short-selling the notes.
But Friday's surge in bond prices indicated some players
still shorted JGBs ahead of the policy meeting, said Kazuhiko
Sano, chief fixed income strategist at Tokai Tokyo Securities.
"Bond prices might have risen so sharply because there were
not many who wanted to sell amid the dearth of liquidity," said
Sano.
The BOJ owned more than 100% of the 368th bonds as of
end-February, according to a note by Keisuke Tsuruta, fixed
income strategist at Mitsubishi UFJ Morgan Stanley Securities.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.