Japan’s Long Bonds Add to Worst Rout in Three Years as BOJ Looms

Japanese long-term bonds fell, with 30-year debt adding to its biggest weekly loss in almost 2 1/2 years, as investors prepared to bid at an auction of the securities Tuesday.

The rout is being driven by speculation the Bank of Japan will reduce its bond-buying program at its next policy meeting Sept. 20-21 now that it owns a third of the nation’s government debt. BOJ Governor Haruhiko Kuroda said Monday he doesn’t share the view there’s a limit to monetary easing. Pacific Investment Management Co. said last month the central bank has pushed monetary policy as far as it can. 

“Unless Governor Kuroda directly rules out scaling back bond purchases, the market will continue to hold that as a possibility,” said Shuichi Ohsaki, the chief rates strategist at Bank of America Corp.’s Merrill Lynch unit in Tokyo. “Selling of longer-dated debt is likely ahead of tomorrow’s 30-year auction.”

The 30-year yield climbed 3 1/2 basis points to 0.54 percent as of 12:29 p.m. in Tokyo, according to Japan Bond Trading Co. It was the highest since March. The yield jumped 16 basis points last week, the most since the period ended April 12, 2013.

The Bloomberg Japan Sovereign Bond Index fell 1.1 percent in August, leaving it up 4.4 percent this year.