JGB Yields Hit Decade Highs, BOJ Announces Additional Bond Buying Operation

REUTERS/Issei Kato/File Photo
Japanese national flag is hoisted atop the headquarters of Bank of Japan in Tokyo, Japan September 20, 2023.

TOKYO (Reuters) – Japanese government bond (JGB) yields rose to decade highs on Monday, prompting the country’s central bank to announce that it would conduct additional bond buying operations.

The Bank of Japan (BOJ) said it would buy JGBs with between five years and 10 years left to maturity on Wednesday, with the purchase amount to be announced at the time of the operation.

The 10-year JGB yield JP10YTN=JBTC rose 1 basis point (bp) to reach its highest level since September 2013 at 0.775% in the morning.

Ten-year JGB futures 2JGBv1 pared losses following the announcement to be down 0.12 at 144.84, from as low as 144.76 earlier.

A summary of opinions at the BOJ’s September meeting published on Monday showed more policymakers discussed the prospects of an eventual exit from ultra-loose policy.

The summary was “slightly more hawkish” than expected, spurring yields to rise, said Naka Matsuzawa, chief Japan macro strategist at Nomura Securities.

“Marginally, they are making more detailed discussions about how they are going to end the whole easing process.”

The 20-year JGB yield JP20YTN=JBTC reached 1.515%, its highest since March 2014, while the 30-year JGB yield JP30YTN=JBTC rose to a decade’s peak of 1.765% before both settled slightly lower.

The Bank of Japan maintained ultra-low interest rates at its monetary policy meeting in September, but BOJ Governor Kazuo Ueda has said the central bank will consider an exit when sustained, stable achievement of its price target is in sight.

In a speech on Saturday, Ueda said considerations over the BOJ’s finances would not prevent it from phasing out stimulus.

The Ministry of Finance will conduct an auction of the 10-year JGB on Tuesday.

Elsewhere, the five-year yield JP5YTN=JBTC and 40-year JGB yield JP40YTN=JBTC both touched nine-month highs, at 0.325% and 1.91%, respectively.