Bank of Japan Steps in Market as JGB Yields Hit Multi-Year High

Passers-by and buildings are reflected on a Bank of Japan board in Tokyo April 26, 2010.

TOKYO, Sept 29 (Reuters) – The Bank of Japan bought 300 billion yen ($2 billion) of bonds with maturities between 5 and 10 years on Friday, intervening in the market to bring down government bond (JGB) yields which hit their highest in a decade.

The 10-year bond yield rose to 0.770%, its most since September 2013, after the BOJ last week decided to keep its ultra-low rate policy unchanged, which has helped the yen JPY= fall to an 11-month low against the dollar this week.

“The BOJ wanted to reiterate its stance to contain rises in the 10-year yield as it approached closer to 1%,” said Keisuke Tsuruta, fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

“Today the central bank prioritized the yields over the yen,” Tsuruta added.

The 10-year yield inched lower after the BOJ announcement to 0.765%, while the yen remained roughly flat against the dollar.

The BOJ in July set a de-facto cap on the 10-year bond yield of 1.0% but kept its allowance band at 50 basis point at either side of its 0% target.

Yields across the curve rose on Friday to track U.S. Treasury yields.

($1 = 149.4200 yen)