JGB yields fall to their lowest level in more than two years after Fed surprise

TOKYO, March 22 (Reuters) – Japanese government bond yields plummeted to their lowest level since November 2016 after the US Federal Reserve abruptly abandoned the tide of tighter monetary policy. leading to a sharp decline in US bond yields.

The ten-year JGB futures contracts gained 0.23 point to 152.96 yen afternoon, with trading volume of 18,720 lots. The market was closed Thursday for a holiday.

Bond prices rebounded in developed markets after the Fed ended its tightening monetary policy on Wednesday, as European yields also fell sharply, reflecting the growing conviction that all major central banks are now seeking to maintain monetary conditions.

The rise in forward contracts helped push some JGB bond yields into a more negative territory as the 10-year benchmark dropped 2.5 basis points to 0.065%, its lowest level since the 9th. November 2016.

Japanese life insurers could transfer part of their domestic bond allocations to non-emerging foreign market bonds from the beginning of the fiscal year (as of April 1), said Takafumi Yamawaki, head of FX and fixed income research at JP Morgan Securities in Tokyo.

Some life insurers may be tempted to recover eurozone bonds as the costs of financing the euro are relatively low, even though yields on 10-year German Bunds remain close to zero. he adds.

Returns on very long maturities fell sharply on Friday, with a 20-year yield down 3.0 basis points to 0.360% and a 3.5-year yield of 3.5 basis points to 0.530%. The 40-year yield yielded 4.0 basis points at 0.590%.

Returns on all these maturities reached their lowest level since November 2016.

On the short-term yield curve, yields also fell, with declines of 1.0 and 1.5 basis points for two- and five-year rates respectively, minus 0.175 percent and less than 0.185 percent. %.

Data released on Friday show that consumer prices in Japan rose 0.7% in February from the previous year, slowing the pace of the previous month.

Also on Friday, a cash auction in which the Ministry of Finance sold 400 billion yen ($ 3.61 billion) of JGB attracted relatively weak demand.

The bid-to-cover ratio, an indicator of demand, rose from 5.54 in the previous auction to 4.41.

The Ministry of Finance regularly sells outstanding JGBs at these auctions to improve market liquidity.

($ 1 = 110.71 yen)