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Goldman Says Bond Traders Focus on Japan Debt Beyond BOJ’s Sway

  • Sale of 20-year Japanese bonds was met with tepid reception
  • BOJ ‘may ultimately have to revisit its YCC framework’
Outside the Bank of Japan (BOJ) headquarters in Tokyo.

Outside the Bank of Japan (BOJ) headquarters in Tokyo.

Photographer: Toru Hanai/Bloomberg

With the Bank of Japan holding firm on its policy of yield-curve control, bond traders are poised to keep putting pressure on the maturities that are relatively free of the central bank’s grip, according to Goldman Sachs Group Inc.

That pressure was evident Thursday when a sale of 20-year Japanese government bonds got a tepid reception, indicating that the dislocation in the cash and futures market continues to curtail investors’ appetite for debt. The bid-to-cover ratio tumbled, while the gap between 20-year bonds over 10-year equivalents is near the widest level since February 2016, according to data compiled by Bloomberg.