MNI: BOJ Offers To Buy JGBs At Fixed-Rate To Contain Yields

     TOKYO (MNI) - The Bank of Japan on Friday announced to buy Japanese

government bonds at a fixed-rate of 0.110% and raised the scale of its purchase

of JGBs with a remaining life of 5 to 10 year, in a widely expected move to head

off a further rise in bond yields.

     The BOJ's fixed-rate bond buying operation is the first since July 7, 2017,

when it conducted a similar operation, also at 0.110%.

     The 10-year bond yield traded at 0.095% on early Friday morning, unchanged

from Thursday's close, but the bond yield is expected to rise after the U.S.

Treasury 10-year yield climbed to a four-year high of 2.786% Thursday.

     The U.S. 10-year bond yield at 2.75% is widely regarded as a long-term

equilibrium rate.

     JGB market participants anticipated a BOJ move to increase the scale of its

bond buying or conduct a fixed-rate bond buying operation or both.

     BOJ officials see that the recent rise in JGB yields has been mainly

influenced by higher U.S. Treasury bond yields and they don't see any domestic

factors to push up JGB yields.

     However, they judged that the BOJ needed to take action to contain higher

JGB yields, which would distort the yield curve that is designed to help the

bank achieve its 2% inflation target.

     The scale of JGB purchases with a remaining life of 10 to 25 years and more

than 25 years was left at Y190 billion and Y80 billion, unchanged from the

previous similar operations on Wednesday.

     Under the yield curve control framework, the BOJ is seeking to stabilize

the 10-year government bond yield, the benchmark for long-term borrowing costs,

at around zero percent and keep the overnight interest rate at -0.1%.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Tokyo Bureau; tel: +81 90-4670-5309; email: max.sato@marketnews.com

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