Bank of Japan offers ‘unlimited’ bond buying to curb rising yields

Kim Kyung-Hoon | Reuters

Bank of Japan (BOJ) Governor Haruhiko Kuroda gestures during a news conference at the BOJ headquarters in Tokyo, Japan November 1, 2016.

Heavy buying of JGBs raises the price of bonds to force down their yield, an essential element of the BOJ’s ultra-loose yield curve control (YCC) policy.

It was the first time in more than six months that the BOJ has conducted special operations to buy bonds to achieve the yields it wants to see, rather than the auctions used in regular operations – a powerful show of force to direct the market.

On top of that, the BOJ increased the amount of its planned buying in five- to 10-year JGBs to 450 billion yen from the 410 billion amount it has favored since late August. Following the BOJ’s operations, the price of the 10-year JGB futures rose to as high as 150.31 from the day’s low of 150.09. It was up 0.11 on the day.

The benchmark 10-year cash JGB yield edged down to 0.090 percent, the same level as its previous close, from 0.095 percent touched earlier.

JGB yields have risen in recent weeks, in line with global peers, on rising expectations that the world’s central banks are increasingly leaning towards winding back stimulus as the global economy gains momentum.