TOKYO: Japanese government bonds slipped on Thursday, particularly in the superlong zone, though losses were limited by a selloff in equities.
At the front end, yields in discount bills turned positive, showing that supply conditions have improved following the Bank of Japan's latest quantitative easing. Yields on bills had turned negative in recent weeks, as the BOJ's large bill purchases had sucked up liquidity and tightened the supply of paper available to the market.
The yield on three-month Japanese government bills touched a record low of minus 0.10 percent late last month. On Thursday, the yield on three-month blls stood at 0.008 percent, while the yield on six-month bills was 0.010 percent.
"The current rise in yields seems to stem from participants clearing out their inventories due to the uncertainty surrounding BOJ market operations," said Toshiaki Terada, a researcher at Totan Research Co.
Minutes of the BOJ's Oct. 6-7 meeting released earlier on Thursday showed some policymakers said inflation could dip below 1 percent due to falling energy prices, which could help explain why governor Haruhiko Kuroda chose to expand monetary stimulus in a tightly split decision last week.
At a subsequent meeting on Oct. 31, the BOJ stunned global investors with unexpected easing steps. It unveiled its plan to increase its purchases of government debt from 50 trillion yen to 80 trillion yen per year, as well as extend the average duration of its JGB holdings to around 10 years.
The BOJ refrained from buying superlong JGBs in its asset purchase programme on Thursday, pushing up yields in the longer end and causing the yield curve to modestly steepen.
On Thursday, the BOJ offered to buy 1.5 trillion yen ($13.11 billion) of JGBs maturing in 1 to 10 years, including 550 billion yen in the 1-year to 3-year zone, 550 billion in the 3-year to 5-year zone, and 400 billion in the 5-year to 10-year zone.
The 20-year yield added 1 basis point to 1.245 percent, after dropping as low as 1.225 percent earlier in the session, while the 30-year yield rose 2 basis points to 1.520 percent, down from a session high of 1.530 percent but up from its low of 1.500 percent.
The benchmark 10-year JGB yield edged up by half a basis point to 0.470 percent.
Fixed-income assets were underpinned by weaker equities, as the Nikkei stock average ended down 0.9 percent due to investors booking profits after an 8-plus percent rise over the past three trading days following the BOJ's move.
The drop in stocks triggered a sharp buyback in the yen, with the dollar falling to 114.51 yen after having hit a seven-year peak of 115.52 yen.
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