TOKYO, April 15 Japanese government bond prices
mostly eased on Monday, as investors sought more clarity on the
Bank of Japan's policy stance, while super-long maturities came
under pressure the most ahead of a 20-year bond offering later
in the week.
* The yield on the current 10-year JGB ticked
up 0.5 basis point to 0.625 percent. At one point, it rose as
high as 0.640 percent, its highest level in about a month.
* The yield has been rising since it had hit a record low of
0.315 percent on April 5, a day after the Bank of Japan unveiled
an aggressive monetary easing plan.
* "The market simply cannot grasp what the BOJ is getting
at," said Katsutoshi Inadome, fixed income analyst at Mitsubishi
UFJ Morgan Stanley Securities.
* "What's the BOJ's priority? Keeping rates low? Or boosting
inflation to two percent, in which case buying five-year bonds
yielding 0.2 percent would be a disaster," Inadome said.
*As the BOJ is targeting 2 percent inflation over two years,
the bond market perceives that expectation to eventually drive
interest rates higher. This is causing uncertainty as the BOJ is
also simultaneously trying to keep long-term yields low.
* The BOJ has pledged to double its bond holdings in two
years -- a positive factor for bonds -- which the central bank
says will help it meet the goal of lifting inflation to two
* Uncertainty on the BOJ's policy boosted volatility in the
market, making it harder for investors to buy JGBs than it used
* High volatility tends to hurt longer maturities more, as
their prices are far more sensitive to yield changes than the
* The 20-year yield rose 3.5 basis point to 1.495 percent
after hitting a three-week high of 1.5 percent at
* Traders were also nervous about how much investors will be
ready to buy at an auction of 1.2 trillion yen 20-year JGB on
Thursday. The spread between 10 and 20 year yields rose to a
two-week high of 87 basis points, rebounding sharply from 2
1/2-year low of 67.5 basis points hit on April 5.
* The 30-year yield rose 4.5 basis point to 1.595 percent
* The 10-year JGBs futures price, which reflect
moves in the cheapest-to-deliver seven year sector, rose 0.07
point to 143.80, after it fell a full point on Friday.