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Japanese bond yields rise as BOJ moves to increase buying

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Japanese government bond yields rose across the board on Wednesday, following U.S. Treasury gains, as the Bank of Japan announced plans to increase its buying operations.

The benchmark 10-year JGB yield rose 1 basis point to 0.245% for the first time since July 20, brushing up against the BOJ’s implicit policy cap of 0.25%.

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This morning, the central bank announced it would offer to buy 550 billion yen of five-10 year bonds, an increase on the 500 billion spent in the prior round.

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“The Bank of Japan adopted a proactive stance to protect the 0.25% upper limit,” said Mizuho Securities market analyst Gen Taniguchi. “The market accepted this, and the 10-year yield has stopped rising for now.”

The 10-year yield had risen steadily through the back half of August after reaching a five-month low of 0.16%, but Wednesday was the first time it tested the BOJ’s policy cap in seven weeks.

The U.S. 10-year Treasury yield rose as high as 3.365%, which helped send the Japanese yen to new 24-year lows of more than 144 to the dollar.

The five-year JGB yield rose 1.5 basis points to 0.035% after opening at 0.04%, its highest level since June 29.

The two-year yield rose 0.5 basis point to -0.080%, returning to a five-week high reached on Thursday.

Longer-term JGB yields also gained. The 20-year yield rose 4.5 basis points to 0.950%, the 30-year yield rose 5 basis points to 1.300%, and the 40-year yield rose 7.5 basis points to 1.480%.

Benchmark 10-year JGB futures fell 0.23 point to 149.15. (Reporting by Sam Byford and Tokyo markets team)

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