TOKYO: Japanese government bond prices rose on Thursday, with the benchmark yield falling to a nearly two-week low, bolstered by the Bank of Japan's asset-buying operations.
Tokyo markets will be closed on May 3 and May 6 for a string of holidays known as Golden Week, so market participants also cited some position adjustment ahead of the long weekend, followed by a week in which the finance ministry has no auctions scheduled.
The BoJ offered to buy 600 billion yen ($6.16 billion) in JGBs outright with residual maturities of more than 5 years and up to 10 years, and another 300 billion yen of notes with residual maturities of more than 10 years.
The purchases are part of its easing scheme under which it will roughly double its holdings of government debt in two years in a bid to pull Japan out of persistent deflation.
"I think the JGB market is settling down more with those operation schedules, and we have seen volatility coming down," said Maki Shimizu, senior strategist at Citigroup in Tokyo.
The demand/supply balance is stable up to 10 years, she said, but above that, caution still reigns.
"Some people want to try steepeners, but they just fear that high volatility in the superlong tenor might bring the market to the other side of their position, so they want to wait and see the timing," she added.
The 10-year yield fell 2.5 basis points to 0.560 percent after dropping as low as 0.555 percent, its lowest since April 19.
The 10-year futures contract finished up 0.37 point at 145.12 after rising as high as 145.15, its loftiest level since April 8.
Volume was a relatively light 23,478 contracts, still short of the average daily volume of 28,407 after the BOJ's April 4 easing, though the highest of this holiday-shortened trading week and up from a four-month low of 15, 864 on April 22.
The superlong tenor underperformed, with the 20-year JGB yield edging down just half a basis point to 1.455 percent, up from a session low of 1.440 percent. The 30-year bond erased gains, its yield rising half a basis point to 1.585 percent, up from a low of 1.560 percent.
Minutes of the BOJ's April 3-4 meeting released on Thursday showed some policy board members fretted that increased purchases of government debt could actually impair financial markets and discourage bank lending.
At that meeting, the BOJ unanimously voted to radically overhaul its monetary policy and embark on its massive stimulus programme.
"It is hard to imagine that yields will rise much, with the BOJ buying so much, and pressure on yields from overseas because of the uncertain outlook for the US economy," said a fixed-income fund manager at a European asset management firm.
On Wednesday, the yield on 10-year Treasuries dropped to a four-month low of 1.614 percent after the US Federal Reserve said it would maintain its bond-buying plan, citing risks to growth from recent US government budget tightening and emphasizing that unemployment is still high.
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