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MNI INSIGHT: BOJ To Monitor 10-Yr JGB Yield Post-US Jobs Data

MNI (London)
--BOJ Officials To Continue Watching Pace Of Any JGB Yield Increase
By Hiroshi Inoue
     TOKYO (MNI) - Bank of Japan officials will pay close attention later Friday
to see whether the release of key U.S. economic data pushes Japanese Government
Bond yields above Thursday's near two-year high, MNI understands
     However, their focus remains of the speed of any 10-year JGB yield rise
toward, or even through, the 0.2% upper end of the BOJ's target range.
     They also remain vigilant as to whether higher superlong bond yields
increase the upward pressure on the 10-year yield above 0.2%, and the BOJ stands
ready to curb higher superlong yields to help cap the 10-year if needed.
     If 10-year yields continue to rise following the release of the September
U.S. employment report and that rise is deemed to rapid, the BOJ would conduct
an outright bond buying operation and/or a fixed-rate bond buying operation to
prevent the 10-year bond yield from rising past 0.2%. 
     Any such operation would unlikely take place outside of Tokyo trading
     However, if the pace of rise in the 10-year bond yield deemed appropriate,
the BOJ would examine whether the 10-year bond yield could push above 0.2% and
higher or how they should deal with higher yields.
     In afternoon trade Friday, the 10-year JGB was trading at 0.151%, just shy
of the 0.155% level seen Thursday, which was the highest yield seen since
January 2016.
     BOJ officials are focused on how the U.S. jobs data for September due out
later today, with concerns that signs of strong job creation and higher wages
will see increased concern over inflation, trigger higher U.S. Treasury yields,
which in turn will push up JGB yields.
     The BOJ didn't react to higher 10-year JGB yields Thursday, despite the
yield rising above the 0.145% level that triggered an Y400 billion extraordinary
bond buying operation on Aug 2. Back then, the central bank deemed a 10 bps rise
in 10-year yields in just 2 days as too rapid.
     This week's rise to 0.155% was deemed appropriate -- to date at least -- as
the speed of the rise was seen as moderate and in response to higher UST yields.
     BOJ officials in charge of daily operations are required to trade the
10-year JGB yield "around zero percent" within a range of -0.2% to +0.2% that
the BOJ board decided. The central bank stands ready to curb higher yields
through outright bond buying operations 'flexibly and appropriately', if the
rise in 10-year bond yield is deemed too rapid.
     The BOJ hopes JGB yields will move flexibly reflecting economic and price
condition developments, as well as overseas bond movements.
     The BOJ decided in July to allow the 10-year bond yield to move in a range
of -0.2% to +0.2%, doubling the previous unofficial range of -0.1% to +0.1%,
aiming at creating an environment for bond yields to move flexibly.
--MNI London Bureau; tel: +44 203-586-2225; email:
[TOPICS: MMJBJI,MMJBJ$,M$A$$$,M$J$$$,MT$$$$,MX$$$$,M$$FI$,MN$FI$]
MNI London Bureau | +44 203-865-3812 |

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