Tokyo Money-Market Rate Turns Negative for First Time

Holders of Japanese government debt could get paid to borrow against the securities as the availability of sovereign bills and bonds wanes amid unprecedented monetary stimulus by the central bank.

The benchmark rate for borrowers using such debt as collateral fell to negative 0.011 percent from 0.038 percent yesterday, according to data compiled by the Japan Securities Dealers Association. The one-day rate for transactions starting the next business day has never been below zero since at least October 2007, figures from the JSDA and the Bank of Japan show.

The nation’s so-called repo rate is the difference in interest that a loan borrower and bond borrower pay each other. Demand for funds wanes as the BOJ buys an unprecedented 7 trillion yen ($69 billion) of government notes every month in addition to buying an amount of treasury discount bills that’s not predetermined.

“The BOJ’s purchases have sapped available bonds and T-bills in the market,” said Toshiaki Terada, a researcher at Totan Research Co., a money-market brokerage in Tokyo.

The rate is applicable for any one-day exchange of loans and bonds starting March 31, the last day of Japan’s fiscal year.

“Demand for T-bills is very tight for the seasonal factor, and it’s most likely to ease from April,” said Naomi Muguruma, a Tokyo-based senior market economist at Mitsubishi UFJ Morgan Stanley Securities Co. “Institutional investors don’t want to hold cash but want to invest around the end of fiscal year.”