BOJ First Unlimited Bond Buys Get No Bids After Yields Retreated

BOJ to Buy Bonds at a Fixed Rate

The Bank of Japan said no bids were placed at its first operations when it offered to buy bonds at a fixed rate, a tool it introduced when deciding in September it would seek to control the yield curve.

Japanese government bonds advanced on Thursday as the central bank said it would carry out two operations, one to buy securities maturing in one to three years, and another for debt of three to five years maturity. Each received zero bids, according to statements from the BOJ.

A selloff in Japanese bonds had threatened to test Governor Haruhiko Kuroda’s determination to keep yields stable with unlimited debt purchases -- a weapon he had so far kept in reserve. He had said in September that the bank would hold unlimited purchases as needed, setting a fixed rate, in order to control yields.

Ten-year sovereign yields turned positive this week for the first time since Sept. 21, when the Bank of Japan announced a shift in policy aimed at pegging them near zero percent. Kuroda added the option of holding purchase operations at fixed rates with no set amount to his toolkit following that decision.

“The market is testing the BOJ’s tolerance for higher yields, but the BOJ may actually challenge the market back by letting yields rise,” Jun Fukashiro, a senior fund manager in Tokyo at Sumitomo Mitsui Asset Management, said earlier. “The reason the BOJ can allow a rise in yields above zero is that, when it needs to, it has the weapons to stop it.”

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE