Many bond market participants were caught off guard on Jan. 9 when the Bank of Japan unexpectedly reduced its purchases of government bonds, instantly pushing yields higher. In the nine days that followed, long-term rates — yields on 10 year Japanese Government Bonds — hit 0.090%, the highest since July
Many bond market participants were caught off guard on Jan. 9 when the Bank of Japan unexpectedly reduced its purchases of government bonds, instantly pushing yields higher. In the nine days that followed, long-term rates — yields on 10 year Japanese Government Bonds — hit 0.090%, the highest since July 2017.
More importantly, it was a sharp departure from the BOJ’s target of keeping long-term rates around 0%. The intense fascination in what was, in effect, a standard operation by the central bank points to wider investor edginess on the possibility that ultra-loose monetary policy in Japan, and around the world, may be coming to an end. The BOJ said on Jan. 9 it would reduce its purchase offers for JGBs with 10 to 25 years until maturity, as well as for those with 25 to 40 years remaining, by 10 billion yen ($89.7 million) each. It was the first time in more than a year that the central bank curtailed its purchase operation for bonds with 10 to 25 years left to maturity.
