TOKYO: Japanese superlong government bond yields fell on Wednesday amid bets of buying by life insurers, though trading in other tenors was subdued as cautious investors awaited new Bank of Japan (BOJ) governor Kazuo Ueda’s maiden policy meeting next week.
The 30-year JGB yield fell 2.5 basis points (bps) to 1.310%, while the 40-year yield declined 2 bps to 1.505%.
The 20-year yield fell 1 bp to 1.070%, amid pressure ahead of Thursday’s auction of new supply.
“From this week, life insurers, who are the main players in the superlong bond market, will be announcing their investment plans for the new fiscal year,” Gen Taniguchi, a market analyst at Mizuho Securities, wrote in a note.
“Hedging costs remain high, so it’s difficult to think there will be an active return to foreign bond buying, meaning the return to yen bonds that we saw last year will probably continue.”
Benchmark 10-year JGB futures were little changed at 147.44 and the 10-year cash JGB yield was also flat at 0.47%.
Both the two-year and five-year yield were unchanged at -0.045% and 0.165%, respectively.
JGB yields fall after strong auction outcome, futures’ gain
The BOJ will decide its monetary policy on April 28, and while Ueda has signalled that he plans to keep ultra-easy stimulus settings unchanged for the time being, the central bank has a history of springing surprises, including a doubling of the yield ceiling for the 10-year note to 0.5% in December.
Sumitomo Mitsui Financial Group priced $1.04 billion of additional tier-1 (AT1) debt on Wednesday, becoming the first major Japanese bank to sell them since the value of similar bonds issued by Credit Suisse was wiped out.
SMFG priced the bonds in two tranches: 89 billion yen ($660.97 million) of five-year notes and 51 billion yen of 10-year bonds.
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