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Japan JGB dealers see room for super-long bond issuance

TOKYO, Nov 26 (Reuters) - Japan’s government has room to sell more super-long bonds with maturity of 20 years and 40 years, many bond dealers were quoted as saying in a meeting with the finance ministry, even as the COVID-19 response has pushed overall issuance to a record amount.

The primary bond dealers say JGB auctions have been carried out smoothly and interest rates remain stable, assuming that the Bank of Japan would keep current easing stance for the time being, a Ministry of Finance (MOF) official briefed reporters on Thursday.

“As such, they expect investors’ appetite for super-long bonds of 20-year-maturity or more to remain relatively stable,” the official said.

The MOF meeting with bond dealers gives a clue to JGB issuance plan for the coming fiscal year beginning in April, while a planned fresh fiscal stimulus this year raises concerns of more bond issues.

Given the medium-to-long-term maturities of 2-year, 5-year and 10-year bonds are targeted by the BOJ’s yield curve control, they could either be increased or decreased, the official quoted many primary dealers as noting.

However, of all annual JGB issuance worth 253 trillion yen ($2.43 trillion), those with maturities of 2 years, 5 years and 10 years increased by record amounts, causing some primary dealers to voice caution about further issuance of bonds with these maturities.

Given the possibility of change in the BOJ’s monetary policy in the medium-to-long term, some others also expressed caution about increasing issuance of 20-year bonds, the official added.

Many dealers agreed that treasury bills with a maturity of one year or less, which have been issued in massive amounts to fund the two extra budgets this fiscal year, should be cut preferentially, if bond issuance to the market are reduced. ($1 = 104.2700 yen) (Reporting by Tetsushi Kajimoto; Editing by Vinay Dwivedi)

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