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Most JGB yields rise as market adjusts after BOJ shock

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TOKYO — Most Japanese government bond yields rose on Friday, as investors continued to digest the ramifications of the Bank of Japan’s surprise decision earlier this week to widen the allowed band for the 10-year yield.

The 10-year JGB yield rose 1 basis point to 0.40% as of 0453 GMT, but that was well back from Tuesday’s high of 0.48% – a level not see since September 2015 – in the immediate aftermath of the BOJ’s announcement that it would double the yield ceiling under its yield curve control (YCC) policy to 0.5%.

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Benchmark 10-year JGB futures fell 16 yen to 146.09 on Friday, on track for a 1.28% decline this week, which would be the worst performance since mid-June.

“It is completely legitimate to call this a de-facto rate hike,” but “based on the information currently available, we are not able to say this week’s YCC tweak is the first step along an agreed roadmap to policy normalization,” Yasunari Ueno, chief market strategist at Mizuho Securities, wrote in a research report.

“The (BOJ’s) Monetary Affairs Department has been working every day to calm the bond market after the shock of the YCC change,” he added. “However, we have yet to see the Bank come up with a bright idea for addressing the deep dissatisfaction heard around the bond market at its perceived failure of communication.”

The 30-year JGB yield rose 1 basis point to 1.545%, while the 20-year yield edged 0.5 basis point higher to 1.205%.

The two-year JGB yield added 0.5 basis point to -0.005%, but the five-year yield fell 1 basis point to 0.205%. (Editing by Rashmi Aich)


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