* BOJ extends asset buying into 2014, sets no time limit
* Investors look to future easing pace after 2 pct inflation
* Euroyen futures price slip after no interest rate cut
* "Superlongs" continue to suffer
By Hideyuki Sano
TOKYO, Jan 22 Japanese government bonds rose on
Tuesday and the five-year bond yield hit a record low after the
Bank of Japan announced it would commit itself to open-ended
asset buying and doubled its inflation target to 2 percent.
But longest maturities remained under pressure, with 20- and
30-year bond yields rising, hurt by concerns about the long-term
impact of such bold money-printing and Japan's ever-increasing
The BOJ pledged to extend asset buying into 2014, with no
time-limit and an initial plan to buy 13 trillion yen in mostly
short-term bills in that year.
The five-year debt yield fell to as low as 0.140 percent
, the lowest recorded since Japan started issuing
5-year bonds in 2000, and last stood at 0.145 percent, down 0.5
basis point on the day.
Yuya Yamashita, strategist at JPMorgan Chase, said some
market players may be viewing the BOJ's open-ended commitment as
an effective guarantee that rates will remain low for a long
time, thereby helping medium-term bonds such as five-year bonds.
Still, its move to a record low surprised many analysts,
including Yamashita, as the yield could have risen because the
BOJ did not cut its 0.10 percent interest on excess reserves,
which has served as a floor for all money market rates.
As a result, the benchmark three-month euroyen futures price
fell 1.5 basis point to 99.765 on disappointment.
Still, JGBs were underpinned by expectations of more asset
buying down the road given that the central bank is now
committed to achieving 2 percent inflation -- something that has
not happened in Japan for more than two decades.
"We'll have to see how hard the BOJ will press on the
accelerator pedal from now on. If this means they always needed
to do something until inflation rises to 2 percent, they would
need to ease every month," said Katsutoshi Inadome, fixed income
strategist at Mitsubishi UFJ Morgan Stanley Securities.
In addition, many investors expect Prime Minister Shinzo Abe
to appoint a policy dove to replace the current BOJ chief
Masaaki Shirakawa, whose term will end in April.
The 10-year JGB yield dipped 0.5 basis point to 0.730
percent while the benchmark 10-year JGB futures
price rose 0.04 point to 144.45.
On the other hand, long-suffering "super-long" bonds such as
the 30-year were pressured by concerns that bold BOJ steps could
one day lead to inflation, undermining the real return of bonds.
The 30-year bond yield rose 0.5 basis point to 1.970 percent
, while the 20-year yield rose 1.5 basis point to
1.750 percent, boosting the 10-20 year yield
spread to match a record high of 101.5 basis points.
The steepening in the yield curve also reflects mounting
concerns about Japan's snowballing public debt, which amounts to
more than 200 percent of its economy.
While a huge pool of Japanese private savings has helped
spare Japan from the type of turmoil that hit indebted countries
in Europe, many investors think Japan's funding capability could
become more vulnerable in the future unless it can boost growth.