TOKYO: Japan’s 10-year bond yield hit a fresh nine-year peak on Wednesday as investors continued to test the Bank of Japan’s tolerance for higher yields following Friday’s surprise policy tweak.
Earlier in the day, the central bank left its purchase offer amounts unchanged from last month in its fixed-rate operations.
Analysts said this could be a signal that the BOJ is ready for yields to rise further following its de-facto lifting of the 10-year yield ceiling to 1%.
“Markets were expecting an increase, so this was a bit of a surprise,” said Shoki Omori, chief Japan desk strategist at Mizuho Securities.
“It does kind of send the message that the BOJ is relaxing the long end.”
The 10-year JGB yield rose 2 basis points (bps) to 0.61%, the highest since June 2014.
It was the first such bond-buying operation since the BOJ kept its 10-year yield target at 50 basis points on either side of zero but set a 1% yield for its purchases.
On Monday, the central bank made additional unscheduled purchases after the benchmark yield jumped to 0.605%. Investors took the BOJ’s move as a sign that the rise was too fast. Benchmark 10-year JGB futures fell 0.3 yen to 146.75.
The 30-year JGB yield rose 1 bp to 1.55%, a level last seen in mid-February.
The 20-year JGB yield rose 1.5 bps to 1.27%, although that was back from Tuesday’s more than five-month high of 1.28%.
The five-year yield rose 1.5 bps to 0.185%, matching Monday’s near-five-month peak.
The two-year JGB had not traded as of 0342 GMT.
“The BOJ will probably continue to respond as they already have, by conducting an emergency purchase if rates rise sharply,” said Makoto Suzuki, senior bond strategist at Okasan Securities.
“But basically, the BOJ accepts the rise in yields.”
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