TOKYO: Japan’s 10-year government bond yield hit a one-week low on Tuesday, as investors were relieved by expectations that the Bank of Japan (BOJ) would keep its ultra-loose monetary policy unchanged.
The 10-year JGB yield fell 1 basis point (bp) to 0.415% by the midday break.
“The market consensus is that the BOJ would keep its monetary policy unchanged, and that has given a relief to investors,” said Kaoru Shoji, Japan rate strategist at SMBC Nikko Securities.
The BOJ is expected to maintain its ultra-loose monetary policy and forecast for a moderate economic recovery at its meeting this week, as robust corporate and household spending cushion the blow from slowing overseas demand, according to sources.
The yield started falling to the current level after hitting 0.480% on April 28, when the BOJ held its ultra-loose policy at its April meeting.
“It looks like investors have covered most of their short positions since the yield started falling in April,” said Shoji.
Foreign investors turned net buyers of the 10-year JGB futures, a commonly-used instrument to hedge rate hikes, in the latest week after being net sellers in the two previous weeks.
JGB yields rise tracking US bond yields
Foreigners bought 60 billion yen ($430.4 million) worth of the securities in the week ended June 2, according to Tokyo Stock Exchange data, after selling a combined 50 billion yen worth of futures in the previous two weeks.
Benchmark 10-year JGB futures were almost flat on Wednesday, rising 0.2 yen to 148.29.
Yields on longer notes also fell, with the 20-year JGB yield falling 1 bp to 1.010%.
The 30-year JGB yield fell 1.5 bps to 1.250%.
The 40-year JGB yield fell 2 bps to 1.425%. The two-year JGB yield and the five-year yield were unchanged at -0.075% and 0.075%, respectively.
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