TOKYO: Yields on benchmark 10-year Japanese government bonds fell to a near-decade low on Thursday, driven by strong expectations that new central bank chief Haruhiko Kuroda will buy more bonds as part of a bold easing policy to pull Japan out of deflation.
"Many investors do not want to hold cash before BOJ eases aggressively," said Tadashi Matsukawa, head of Japan fixed income at PineBridge Investments.
Kuroda, who officially became the Bank of Japan Governor on Wednesday, is expected to hold a news conference later on Thursday.
"Kuroda will have an inaugural address today. He is already reported in newspapers that he is going to be easing aggressively," Matsukawa said.
The 10-year yield slipped 0.5 basis point to 0.585 percent after touching 0.580 percent, its lowest level since June 2003. The market was closed on Wednesday for a holiday.
Ten-year JGB futures climbed as much as 16 ticks to a record high of 145.56. They ended the morning session 9 ticks high at 145.49.
The 20-year yield eased 1.5 basis points to 1.540 percent to a two-week low.
The surge in Japanese equities continues to force pension funds to trim their share holdings from exceeding allocation limits, prompting them to buy more bonds.
Tokyo's Nikkei advanced 1.3 percent on Monday morning. It has rallied more than 45 percent since mid-November after Prime Minister Shinzo Abe embarked on fiscal expansionary and monetary easing steps, dubbed as "Abenomics", to revive the world's third-largest economy.
A Reuters poll showed confidence among Japanese manufacturers improved for a fourth straight month in March and should soon turn positive, further indications that a softer yen and Abe's stimulus plans are helping lift the gloom in the economy.
JGBs were also supported by many investors putting their redemption money back into the market.
"In addition to speculation regarding additional monetary easing by the BOJ, several factors putting downward pressure on interest rates have coincided this month, as it is the last month of the fiscal year," Citigroup said in a note.
"More than 10 trillion yen ($104.7 billion) of JGBs are due to mature in the second half of March."
The brokerage said the 10-year yield could drop below 0.500 percent if the central bank increases purchases of five- and 10-year JGB significantly.
But it added that JGB yields could rebound at some point during April-June as many investors were likely to pocket gains.
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