August 3, 2018 / 8:40 AM / 4 months ago

JGBs rebound, but log worst week in 10 months after BOJ roils market

TOKYO, Aug 3 (Reuters) - Japanese government bond prices were mostly higher on Friday, regaining some of its poise after the Bank of Japan conducted an unplanned buying of bonds the previous day to reassure the market.

Still, on the week, the benchmark 10-year JGB futures lost 0.45 point, the biggest downturn in more than 10 months after the central bank said it would tolerate greater moves in the market.

The benchmark 10-year JGB cash bond yield fell one basis point to 0.105 percent off a 1-1/2-year high of 0.145 percent touched on Thursday.

BOJ Governor Haruhiko Kuroda has said the BOJ would allow the 10-year yield to trade up to about 20 basis points away from the BOJ’s target of zero percent.

But traders were cautious about pushing up yields too much for fear of triggering BOJ intervention.

Traders also noted few market players have 10-year JGBs to sell, because the BOJ has sucked up a large volume of these bonds.

The data showed the BOJ held about 75 percent of the benchmark 351st 10-year JGBs at that time and a staggering almost 90 percent of the off-the-run 350th and 349th 10-year JGBs.

That means even short-selling is difficult because traders have a hard time finding investors from who they can borrow those bonds for short-selling.

The longer end of the market was shakier as the market braced for next week’s 30-year JGB auction and amid speculation that the BOJ may tolerate further rise in yields of longer maturities.

The 20-year yield rose 1.0 basis point to 0.620 percent , having hit one-year high of 0.630 percent at one point.

The 30-year yield rose 1.5 basis point to 0.845 percent . (Editing by Shri Navaratnam)

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