TOKYO, Feb 1 — Japan’s sovereign bond yields slid to record lows across the curve amid the aftershock from the central bank’s unexpected move last week to adopt a negative interest— rate strategy.
Benchmarks 10-year yields touched 0.05 per cent, 20-year yields reached an unprecedented 0.74 per cent and two-year yields slid to a record minus 0.11 per cent after the Bank of Japan on Friday unexpectedly cut the rate on excess reserves held by financial institutions at the central bank to minus 0.1 per cent.
Expectations for price swings for debt over a 60-day period soared on Friday to the highest since July.
“Volatility will remain high for the time being amid a search for where the appropriate levels area, but one thing is clear: the downtrend in yields strengthened further,” said Shuichi Ohsaki, the chief rates strategist at Bank of America Corp’s Merrill Lynch unit in Tokyo.
“Eventually, a sub-zero yield on 10-year bonds will come into sight.”
The yield on the 10-year bond dropped 3 ½ basis points to 0.06 per cent as of 10:20am in Tokyo from Friday, according to Japan Bond Trading Co, the nation’s largest inter-dealer debt broker. The 20-year yield fell six basis points to 0.75 per cent, while the two-year yield slid three basis points to minus 0.11 per cent.
Japan’s 30-year yields dropped 7 ½ basis points to 0.99 per cent, after touching 0.985 per cent, the lowest since April 2013. A basis point is 0.01 percentage point.
Friday’s move to penalise a portion of banks’ reserves complemented the BOJ’s record asset-purchase programme, including ¥80 trillion (RM2.7 trillion) a year in government-bond purchases, which was kept unchanged at the board meeting. — Bloomberg