Long-term JGB yields edge up as BOJ trims debt buying

TOKYO, Sept 30 (Reuters) - The yield on benchmark 10-year Japanese government bonds edged up on Friday as the Bank of Japan trimmed the amount of long-term debt it buys at its regular market operations.

The BOJ said it reduced its purchases of JGBs with five to 10 years of maturity to 410 billion yen ($4.04 billion) from 430 billion on Wednesday. It was not the first time the BOJ had bought less than markets had expected.

The central bank decided at a policy meeting last week to keep the 10-year JGB yield at around zero percent, and reducing the amount of debt it buys at its regular operations is one way it could achieve that goal.

The BOJ re-jigged its policy framework last week in an attempt to control the yield curve, while trying to reassure jittery markets that it would maintain its huge bond purchases for now.

The bank now aims to steepen the yield curve, after a sharp drop earlier this year in long-term yields deep below zero flattened the curve and posed problems for financial institutions.

The 10-year JGB yield was last up 1.5 basis points at minus 0.075 percent.

Early in July the benchmark yield, already on a steady decline under the BOJ's massive debt-purchasing scheme, had touched a record low of minus 0.300 percent as market turmoil following the Brexit referendum boosted demand for safe-haven government debt.

"The BOJ appears to have acted to contain the decline by the 10-year yield before it reached minus 0.100 percent, a level that is now likely to serve as the bottom of the yield's range," said Katsutoshi Inadome, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

The central bank is due to announce the latest details of its upcoming JGB-buying operations later on Friday.

"Given that the market is wary of consequences, like the yen appreciating should the BOJ taper its JGB buying, a major change to their debt-purchasing scheme seems unlikely," Inadome said.

($1 = 101.4700 yen) (Reporting by the Tokyo markets team; Editing by Kim Coghill)

Advertisement