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Japan’s 20-Year Bonds Fall on BOJ Bond Buying Operation Results

Japan’s 20-year bonds fell after the Bank of Japan (8301)’s operation to buy longer-dated year debt attracted less demand than some traders expected.

Twenty- and 30-year securities declined for the first time in three days after the BOJ carried out its first bond buying operation since announcing last week that it would streamline its asset purchase programs, temporarily suspend a cap on some bond holdings and drop a limit on debt maturities. The central bank said today that it offered to purchase from the market a total of 1.2 trillion yen ($12.2 billion) in debt with more than five years to maturity on April 10.

“The BOJ’s operation to buy debt with a maturity between 5 and 10 years was strong, while the one to purchase debt with more than 10 years to maturity was weak, leading to the bearish move in long-term bonds,” said Atsushi Ito, Tokyo-based chief strategist for Japanese government debt at BNP Paribas, one of the 24 primary dealers obliged to bid at the nation’s auctions.

Twenty-year yields rose nine basis points to 1.225 percent, while 30-year rates gained seven basis points to 1.28 percent as of 6 p.m. in Tokyo, according to Japan Bond Trading Co., the nation’s largest interdealer debt broker. The yield on the benchmark 10-year note was 0.525 percent after it touched a record low of 0.315 percent on April 5.

Bond futures for June delivery jumped as much as 1.23 to 145.25, causing the Tokyo Stock Exchange to issue a circuit breaker, before ending the afternoon session 0.2 percent higher at 144.34 from last week’s close at the Tokyo Stock Exchange. The contract’s sudden surge caused the bourse to issue the breaker from 12:35 p.m. to 12:46 p.m. The futures tend to track debt with seven years to maturity.

Operation Results

In today’s operation, the BOJ’s offer to buy 1 trillion yen of bonds with maturities between 5 and 10 years attracted 2.05 trillion yen in total bids. The central bank’s operation to purchase 200 billion yen of bonds due in more than 10 years attracted 633.7 billion yen in total bids.

The BOJ announced on April 4 that it will buy 7 trillion yen of bonds a month. The central bank’s monthly purchases of government bonds stood at an average of about 3.4 trillion yen in the first quarter, according to data compiled by Bloomberg.

The BOJ said it had changed the target for money-market operations from the overnight call rate to the monetary base.

To contact the reporters on this story: Yumi Ikeda in Tokyo at yikeda4@bloomberg.net; Masaki Kondo in Singapore at mkondo3@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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