Japan's 10-year government bond yield falls on hopes of higher BOJ buying

BY Reuters | ECONOMIC | 09/30/22 01:48 AM EDT

TOKYO, Sept 30 (Reuters) - Japan's 10-year government bond yields fell on Friday, supported by hopes that the Bank of Japan would increase bond buying from the next quarter to curb elevated yields.

The 10-year JGB yield fell 1 basis point to 0.240% and the five-year yield fell 1 basis point to 0.065%, despite a sell-off in U.S. Treasuries overnight.

The BOJ will announce details of its bond buying operations for the October-December quarter later in the day.

The market expects the central bank to increase the amount for 5- to 10-year bonds it will purchase to 550 billion yen each time from 500 billion yen planned for the current quarter.

The BOJ has already increased that amount for the current quarter, offering to buy 550 billion yen of bonds with those maturities in its operation earlier in the day.

"Unless the central bank increases the amounts of its offer for super-long ends, the outcome of the schedule will not turn positive," said Katsutoshi Inadome, a senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

The 20-year JGB yield rose 2 basis points to 1.020%. The 30-year JGB yield was flat at 1.395%. The 40-year JGB yield was unchanged at 1.595%.

The two-year JGB yield was flat at -0.050%.

Benchmark 10-year JGB futures rose 0.12 point to 148.22, with a trading volume of 10,506 lots. (Reporting by Junko Fujita and the Tokyo markets team; Editing by Subhranshu Sahu)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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