No Trades in Japan 20-Year Bond Future Spur Rule-Change Talk

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Twenty-year bond futures haven’t traded for more than six weeks in the world’s second-biggest market, prompting Japan Exchange Group Inc. to consider cutting the minimum price move for them to revive demand.

The nominal price unit may be lowered to 0.01 yen from 0.05, according to Masahiro Yada, a spokesman for the Osaka Stock Exchange, which is a unit of Japan Exchange. The 20-year contract hasn’t traded since March 11 after it was reintroduced in April 2014 after a 12-year hiatus, he said. The change could happen as soon as July, Yada said.

“The current 0.05 tick may be difficult to use for some,” Yada said by phone from Osaka. “We may make the change to match the 0.01 unit of 10-year futures.”

Japan Exchange announced more than a year ago that it was re-introducing 20-year JGB futures to help mitigate the risk of higher yields. Since then, yields on the underlying debt have dropped about 50 basis points as the Bank of Japan expanded record easing to help reach a 2 percent inflation target.

Trading in benchmark 20-year bond futures averaged 23 contracts a day from April 7, 2014 through March 11, when they last traded, data compiled by Bloomberg show. The average for benchmark 10-year bond futures exceeded 30,000.

The 20-year government bond yield rose two basis points to 1.07 percent as of 4:49 p.m. in Tokyo, according to data from Japan Bond Trading Co. A basis point is 0.01 percentage point.

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