JGBs soar, benchmark yield plunges to record low after BOJ eases
* 10-yr yield touches record low of 0.425 pct * 10-yr futures jump to intraday record high * Superlong yields also drop to near-decade lows TOKYO, April 4 (Reuters) - Japanese government bond futures soared to a record high on Thursday and the benchmark yield plunged to a record low after the Bank of Japan shocked markets by dramatically easing and radically overhauling its monetary policy. Superlong JGB yields also skidded to their lowest levels in nearly a decade after the central bank said it will adopt a new balance sheet target and pledged to double its JGB holdings in two years in a bid to arrest deflation. The 10-year yield dropped 12.5 basis points to a record low of 0.425 percent. It was last down 9 basis points at 0.460 percent. "The market was caught off guard," said Tadashi Matsukawa, head of fixed-income at Pinebridge Investments in Tokyo, who said many investors had held off buying early in the session on expectations that they would be able to buy on dips after the decision was announced. "Today was like panic buying, and dealers had to cover at very expensive levels," he said. Ten-year JGB futures ended one tick shy of their intraday all-time record peak, gaining 0.60 point to 146.04. Longer maturities also skyrocketed after the BOJ said it will combine two bond-buying schemes, its asset-buying and lending programme and the "rinban" bond-buying market operation, to buy JGBs with all maturities across the yield curve. Monthly JGB purchases under the new program will total about 70 percent of newly issued debt, but are not expected to distort markets, BOJ Governor Haruhiko Kuroda said at a news conference after his debut policy-setting meeting. The meeting was the first chaired by Kuroda since he assumed the BOJ's helm last month with a vow to whip deflation, and the decisions were made by unanimous vote. "We are still trying to scrutinize how the purchase will be done, but I think the average of seven years to maturity, depending on the market outstanding, will be centered on the 10-year sector, but with decent size purchases in the superlong tenor as well," said Maki Shimizu, senior strategist at Citigroup in Tokyo. "That is why the market is rallying like this," she added. The 20-year yield tumbled 27 basis points to 1.120 percent, its sharpest one-day move since July 1999, while the 30-year yield also shed 27 basis points, its biggest move in about a decade, to 1.250 percent, after falling as low as 1.220 percent. The 40-year JGB, an illiquid instrument, was said to be untraded and its yield indicated down 30.5 basis points at 1.280 percent. The BOJ said it will go back to open-ended asset purchases, and buy over 7 trillion yen ($75 billion) of long-term JGBs each month, so that the balance of its bond holdings will increase at an annual pace of 50 trillion yen. Even before Japan's central banks sent yields into a tailspin, concerns about the U.S. economy had bolstered bond market sentiment. Data overnight showed weaker-than-expected private sector hiring last month and a services sector index fell short of forecasts. Rising tensions on the Korean peninsula further underpinned demand for safe-haven fixed income assets. North Korea has moved what appears to be a mid-range Musudan missile to its east coast, South Korea's Yonhap news agency said on Thursday.
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