January 29, 2016 / 5:31 AM / 5 years ago

JGB yields sink to record lows after BOJ shocks with negative rates

* BOJ blindsides markets by adopting negative interest rates

* JGB 5-year, 10-year yields drop to record lows on BOJ

TOKYO, Jan 29 (Reuters) - Japanese government bond yields sank to record lows on Friday after the central bank shocked markets by easing monetary policy through the adoption of negative interest rates.

The Bank of Japan announced it will charge 0.1 percent interest on current accounts that financial institutions hold at the central bank. It was a shock move designed to prevent a deflationary mindset and cushion any blows to business sentiment from the recent global markets turmoil.

“The BOJ opened a new door. It is now aiming to ease through interest rates in addition to quantitative and qualitative measures. It now has room to work with interest rates should more easing measures become necessary,” said Akito Fukunaga, chief fixed income strategist at Barclays in Tokyo.

The 10-year JGB yield plummeted to an all-time low of 0.090 percent for its biggest one-day fall since November 2003. The yield was last down 8 basis points at 0.140 percent.

The five-year yield also dropped to a record low, touching minus-0.070 percent. The 20-year yield hit a 13-year trough of 0.810 percent. March 10-year JGB futures surged to a record peak of 150.70.

“The BOJ is still responsible for building up the monetary base through JGB buying operations. It will now have to buy JGBs under negative interest rates, meaning it has to purchase bonds at expensive levels,” said Kazuhiko Sano, chief bond strategist at Tokai Tokyo Securities.

“The 10-year yield could drop to as low as minus-0.1 percent as a result,” he said.

The central bank’s surprise decision sent big ripples across Tokyo financial markets, sending the dollar surging as much as 2 percent versus the yen and the Nikkei whipsawing in and out of the red. The stock index was last up about 1.9 percent. (Reporting by Shinichi Saoshiro and the Tokyo markets team; Editing by Sam Holmes)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below