SINGAPORE: Japanese government bond yields fell on Tuesday, with the yield on 10-year bonds touching one-month low after the Bank of Japan (BOJ) maintained its ultra-low monetary policy last week.
The 10-year JGB yield fell 1 basis point to 0.380% after touching a one-month low of 0.375% earlier in the session.
The BOJ stuck to its ultra-easy policy, as expected, on Friday, signalling it would remain a dovish outlier among global central banks and focus on supporting a fragile economic recovery.
The central bank maintained its -0.1% short-term interest rate target and a 0% cap on the 10-year bond yield set under its yield curve control (YCC) policy.
Ten-year interest rate swaps were at 0.59%, far below the over 1% it was at in January during the feverish speculation over the end of YCC.
Amir Anvarzadeh, a market strategist at Asymmetric Advisors, said that if the BOJ’s monetary policy doesn’t change as the firm had expected it to do by now, the markets will simply force the issue which will prove more painful.
A “battlefront will likely be the JGB market as investors could re-test BOJ’s resolve to defend its YCC as weak yen brings with it more inflationary pressures.”
The yen touched a fresh seven-month low against the dollar of 142.26 on Tuesday.
Japan’s 10-year bond yield dips as BOJ maintains policy
The 20-year JGB yield fell 0.5 basis point to 0.970%, while the 30-year JGB yield eased 0.5 basis point to 1.210%.
The five-year yield fell 0.5 basis point to 0.070%. Benchmark 10-year JGB futures rose 0.14 yen to 148.57.
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