The Bank of Japan on Wednesday conducted an unlimited purchase of the No. 356 10-year government bond at a fixed-rate of 0.25% to prevent the yield curve from distorting as it also continued operations for the unlimited purchase of the No. 366 10-year bond, the benchmark instrument.
The yield on the No. 356 10-year bonds, the cheapest bond, rose above 0.300% in the wake of the drop of September 10-year bond futures. The No. 356 10-year bond yield is increasing upward pressure on JGB yields broadly, which could distort the overall JGB yield curve, so the BOJ decided to buy the No. 356 bonds to curb higher bond yields. The BOJ will unveil its latest monetary policy views on Friday, (See: MNI STATE OF PLAY: BOJ To Stay Easy Despite Weak Yen, Yields).