TOKYO, Jan 23 (Reuters) - Yields on super-long Japanese government bonds (JGBs) declined further on Tuesday after the Bank of Japan (BOJ) maintained ultra-easy monetary settings in a widely expected move.
At a two-day meeting that concluded earlier in the day, the BOJ left unchanged its short-term rate target at -0.1% and that for the 10-year bond yield around 0%.
Expectations of a January policy shift had receded after a devastating earthquake that hit western Japan on New Year's day.
The 20-year JGB yield fell 4 basis points (bps) to 1.410% and the 30-year JGB yield slipped 4.5 bps to 1.720%. The 40-year JGB yield fell 4.5 bps to 1.985%.
"Investors bought back super long-dated bonds, which became cheap after their yields rose sharply in the past sessions," said Tadashi Matsukawa, head of fixed income investment at PineBridge Investments Japan.
The spread between 10-year and 30-year JGBs last stood at 108 bps, the widest since January last year. That compared with a spread of 22 bps for U.S. 10-year and 30-year Treasury yields.
Going forward, yields may fall further. With Japan's benchmark Nikkei share average hitting a fresh 34-year high, investors may start rebalancing their portfolios by selling stocks and buying JGBs, strategists said.
Matsukawa expects the BOJ to end its negative rate policy in April as the trend of wage increase will become clearer by then.
"That timing would be the last chance for the BOJ to do so before the U.S. (Federal Reserve) starts cutting rates," said Matsukawa.
The 10-year JGB yield was unchanged from early trade at 0.64%.
The Japanese central bank also maintained its forward guidance, under which it pledges to expand the monetary supply to achieve its 2% inflation target. (Reporting by Junko Fujita; Editing by Rashmi Aich and Subhranshu Sahu)
