The benchmark 10-year JGB futures changed course to
rise 0.45 points and the five-year yield fell 4.5
bps to 0.100%, its lowest since March 31.
As widely expected, the BOJ kept intact its short-term
interest rate target at -0.1% and that for the 10-year bond
yield around 0% at the two-day meeting that ended on Friday.
The decision was somewhat a disappointment for investors who
positioned JGBs for a policy tweak. Some investors braced for
the change as pressure was building on the BOJ's stance with
inflation picking up and large employers lifting wages.
"The decline in the yield suggests that some investors made
a speculative bet for a policy change and shorted JGBs," said
Takayuki Miyajima, senior economist at Sony Financial Group.
"But the short selling was muted compared with sell-offs we
have seen previously."
These bets included the BOJ widening the trading band of the
benchmark 10-year yield further, shifting the yield target to a
shorter duration or abolish the yield curve control policy.
"Unless the yields come under upward pressure from overseas
rate moves, the BOJ may tweak its policy at July meeting when
the central bank will release a new quarterly projections," said
Ataru Okumura strategist at SMBC Nikko Securities.
The BOJ is also scheduled to hold a policy meeting in June. Yields fell across the tenors, with the 30-year JGB yield tanking 9 bps to 1.245% and the 40-year JGB yield falling 9 bps to 1.430%.
"Super-long yields fell because investors who waited for the
BOJ decision bought the bonds, not for covering short
positions," said Okumura.
(Reporting by Junko Fujita in Tokyo; Editing by Rashmi Aich and
Savio D'Souza)
