JGBs gain following BoJ’s dedication to keep 10-year yields near zero

The Japanese government bonds gained Thursday as the Bank of Japan in its 'Summary of Opinions' from the December monetary policy meeting showed a strong dedication to keep the 10-year yields near zero despite the opposition from one of its board members.

The benchmark 10-year bond yield, which moves inversely to its price, fell 1-1/2 basis points to 0.045 percent, the long-term 30-year bond yields dipped 1 basis point to 0.70 percent and the yield on short-term 2-year note slid 1 basis point to -0.16 percent by 06:00 GMT.

The Bank of Japan in its December two-day monetary policy meeting’s summary of opinions mentioned that under the framework of yield curve control, the yield curve has been formed smoothly in a manner consistent with the guideline for market operations. The Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control has been functioning as intended thus far, and is contributing to economic recovery and price increases.

Additionally, the central bank should conduct market operations so that 10-year Japanese government bond (JGB) yields are kept at zero percent. The current situation presents a good opportunity to achieve the price stability target of 2 percent.

However, one of its members voted against keeping 10-year bond yields at zero percent and suggested to allow long-term interest rates to increase if such moves reflected improvements in the economy.

Also, the BoJ purchased 400 billion yen of short-term notes (1-3 year maturity), 420 billion yen of 3-5 years maturity, 410 billion yen of 5-10 years of maturity and offered to lend 921.3 billion yen as a secondary source of supply of some issues for settlement under an agreement expiring on 12/30.

Meanwhile, the benchmark Nikkei 225 closed down 1.29 percent lower 19,401.72. While at 07:00 GMT, the FxWirePro's Hourly Japanese Yen Strength Index remained slightly bullish at +87.08 (higher than +75 represent a bullish trend).