Japan : JGBs continue to skid ahead of 10-year sale

TOKYO : Japanese government bonds continued to drop on Monday, sending the benchmark yield to a 5-week high, after the Bank of Japan’s policy easing steps on Friday disappointed investors hoping for additional bond purchases.

The 10-year JGB yield added 4 basis points to minus 0.140 percent, after earlier rising as high as minus 0.130 percent earlier, its highest since June 23.

On Tuesday, Japan’s Ministry of Finance will offer 2.4 billion yen ($ 23.42 million) of 10-year JGBs.

September 10-year futures ended down 0.36 point at 152.24.

The superlong zone also weakened, with the 20-year JGB yield rising 3 basis points to 0.210 percent and the 30-year JGB yield adding 2.5 basis points to 0.285 percent.

Earlier on Monday, the BOJ offered to buy 70 billion yen of JGBs maturing within one year, 400 billion yen of 1- to 3-year JGBs, and 420 billion yen of 3- to 5-year JGBs under its asset purchasing programme.

On Friday, the BOJ increased its purchases of exchange-traded funds but kept its base money target at 80 trillion yen and maintained its pace of purchases for other assets, including JGBs.

The BOJ also said on Friday that it would double the size of one of its dollar lending schemes to $ 24 billion from the current $ 12 billion.

The one-year dollar/yen basis swap spread, or the cost of swapping yen for dollars for a year, dropped to around 70 basis points from around 77 basis points before the BOJ decision.