JGBs firm, superlong zone rallies after BOJ operations

26 Apr, 2016

TOKYO: Japanese government bonds firmed on Tuesday, with prices of superlong JGBs rallying after strong results of the Bank of Japan's buying operations.

The central bank offered to buy 450 billion yen ($4.06 billion) of JGBs in the 5- to 10-year zone, 220 billion yen of JGBs in the 10- to 25-year zone and 180 billion yen of JGBs in the 25- to 40-year zone under its JGB purchase programme.

The offer-to-cover ratios, which gauge selling pressure, declined in all three zones, indicating bondholders succeeded in selling their JGBs at higher prices to the BOJ.

The 30-year yield fell 7 basis points to 0.335 percent.

The benchmark 10-year yield shed 3 basis points to minus 0.105 percent, while the 10-year JGB futures contract ended up 0.25 point at 151.86.

Adding to the safe-haven appeal of fixed-income assets, Japan's Nikkei stock index ended down 0.5 percent.

Investors' main focus this week remains the BOJ's two-day meeting that concludes on Thursday, as well as the U.S. Federal Reserve meeting outcome on Wednesday.

The BOJ is likely to cut its price forecasts and debate whether a strong yen, weak global demand and soft consumption have hurt inflation expectations enough to warrant more stimulus steps.

Investors are likely to adjust positions ahead of Japan's Golden Week string of holidays that begins on Friday. Markets will be open as usual on May 2 and May 6, but many participants often use the holidays to take the entire week off.

Copyright Reuters, 2016

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