Kuroda Flattens Bond Market as Two-Year Yield Hits Minus 0.04%

Japan’s two-year yields dropped to a record low of minus 0.04 percent after the central bank maintained unprecedented stimulus to help the nation reach a 2 percent inflation target amid a decline in crude oil prices.

Thirty-year yields fell to the lowest since April last year when Bank of Japan Governor Haruhiko Kuroda embarked on record asset purchases to jump start an economic recovery. The BOJ today kept unchanged its commitment to boost the monetary base at an annual pace of 80 trillion yen ($671 billion), as forecast by all 33 economists surveyed by Bloomberg News.

“Supply-and-demand conditions are good, so there aren’t people in the market who want to sell as the central bank’s massive buying continues,” said Makoto Suzuki, a senior bond strategist in Tokyo at Okasan Securities Group Inc.

Yields on 0.1 percent government notes maturing in December 2016 fell 2 1/2 basis points to minus 0.04 percent as of 3:50 p.m. in Tokyo from yesterday, according to data from Japan Bond Trading Co., the nation’s largest inter-dealer debt broker. The price advanced 0.049 yen to 100.276. The five-year yield reached a record low of 0.03 percent.

The 30-year yield dropped 3 1/2 basis points to 1.32 percent, after touching a 20-month low of 1.315 percent. The benchmark 10-year yield was little changed at 0.355 percent. The spread between 30-year and two-year debt reached its tightest level since April 2013.

“The BOJ is moving forward with constant buying, accelerating the tightening of debt supply in the market,” said Takafumi Yamawaki, chief rates strategist in Tokyo at JPMorgan Chase. “The long-term debt auctions for the remainder of the year are over and investors have no special inclination to sell.”

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