TOKYO, Sept 27 (Reuters) - The Bank of Japan said it
would purchase Japanese government bonds in a special operation
on Tuesday, with the benchmark 10-year yield brushing against
the 0.25% policy ceiling as the central bank battles a
relentless upward surge in global rates.
The BOJ stands alone among developed markets in keeping the
short-term policy rate negative, in addition to pinning the zero
long-term yield, citing tepid wage growth, relatively low core
consumer inflation compared with peers, and a fragile economic
The BOJ will purchase debt with 10- to 25-year maturities
worth 100 billion yen ($692.28 million), and securities with 5-
to 10-year maturities worth 150 billion yen.
The benchmark 10-year JGB yield was up 0.5
basis point at 0.25%, as of 0538 GMT, a level not seen since
Sept. 16. The central bank pins the yield at +/- 25 basis points
around zero under its yield curve control policy.
Japan's bond market is under pressure amid a broad climb in
global yields as major central banks including the U.S. Federal
Reserve and the European Central Bank race to hike interest
rates to rein in superheated inflation.
"The BOJ is trying to calm down speculation that it could be
forced to change policy," said Masayuki Kichikawa, chief macro
strategist at Sumitomo Mitsui Asset Management in Tokyo.
"It makes very clear that it has no intention to change
monetary policy for the foreseeable future."
Japan's central bank maintained its stance last week,
despite growing policy divergence pushing the yen to 24-year
lows. Japanese authorities intervened in the foreign exchange
market for the first time since 1998 to shore up the battered
The upward trajectory in rates has been exacerbated in
recent days by soaring UK gilt yields after investors delivered
a scathing assessment of the new government's fiscal plans.
In a sign of the strain on the market, 10-year notes with
nine years to maturity were at 0.3%, according to
Benchmark 10-year JGB futures fell 0.29 point to
147.71 after earlier touching a three-month low of 147.62.
"The BOJ controls the 10-year yield but other maturities are
not controlled so we're seeing a skew, a kind of bizarre shape
of the yield curve," Sumitomo Mitsui's Kichikawa said.
Traders said the market had also been on edge ahead of an
auction of 40-year JGBs, after a very poor result for a 20-year
bond sale on Sept. 15. However, the latest sale went smoothly,
market players said.
Even so, the 40-year JGB yield jumped 8.5
basis points to 1.635%, the highest level in Refinitiv data
going back to 2015.
The yield on the 30-year JGB rose 6 bps to
1.435% for the first time since September 2015, and the 20-year
yield advanced 4 bps to 1.03% for the first time
since December 2015.
The five-year yield added 2 bps to 0.09%, a
level not seen since September 2015.
The two-year yield rose 1 bp to a three-month
high of -0.050%.
($1 = 144.4500 yen)
(Reporting by Kevin Buckland; Editing by Sherry Jacob-Phillips
& Shri Navaratnam)