Japanese government bond (JGB) yields were mixed on Tuesday as the Bank of Japan (BOJ) left bond-buying bids unchanged, shifting focus to the central bank’s planned summary of views later in the week.
While some market participants thought the BOJ might reduce tender offers in the morning, the regularly scheduled bond-buying operation went off without incident, supporting bond buying.
The yield on the 10-year JGB fell 3 basis points (bps) to 0.870%, while the benchmark 10-year futures contract edged up 0.37 yen to 144.66 yen. Bond yields move inversely to prices.
Investors remain cautious, however, ahead of Thursday’s release of a summary of views from the BOJ’s April meeting, which could provide clues about its policy outlook and plans to reduce bond purchases.
At its April meeting, the BOJ took a stance that markets deemed dovish, despite pressure from a yen that is at a 34-year low.
It also maintained its guidance on buying government bonds, dashing the hopes of some traders who thought it might soon reduce its purchases.
But BOJ observers say the hawkish murmurings may have been missed.
Investors may now reconsider their initial assessment, said Naka Matsuzawa, chief macro strategist at Nomura Securities.
“It is now clear that the BOJ is preparing to reduce its JGB purchases,” he said, referring to an analysis of the bank’s bond purchases in the full text of its quarterly outlook report, published after the April meeting.
“This was a very unusual report that contained analysis of JGB’s purchases, which is not usually the case. It came out of nowhere.”
Investors also watched a 10-year bond auction scheduled for Wednesday.
The two-year yield edged down 1 bps to 0.275% and the five-year yield slipped 1.5 bps to 0.470%.
The 20-year JGB yield was yet to trade as of 0520 GMT.
The 30-year JGB yield remained stable at 1.980%. (Reporting by Brigid Riley; Editing by Varun HK)
