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JGB yields rise despite BOJ buying ahead of policy meet

* JGB yields rise as market expects BOJ to loosen its grip

* BOJ conducts particular bond buying operation at zero.10 pct

* BOJ buys document 1.64 trln yen in particular operation

* 20-year yield hits 6-month excessive of zero.600 pct

By Hideyuki Sano

TOKYO, July 30 (Reuters) – Japanese authorities bond costs sagged on Monday, with the benchmark 10-year yield touching its highest degree in virtually a 12 months and a half, because the market tries to check the Bank of Japan’s intention ahead of its policy determination the following day.

That pressured the BOJ to conduct a particular bond buying operation for 2 classes in a row and to finish up buying a document quantity in that sort of buy to stem rising bond yields amid rising expectations the BOJ may regulate its policy.

While there is no such thing as a clear consensus, some market gamers suppose the BOJ may presumably announce it might permit bigger strikes within the JGB market by loosening its interpretation of its policy goal of “around zero percent” within the 10-year yield.

Since the BOJ started the present policy in September 2016, the market has taken that to imply lower than zero.100 % because the BOJ has intervened to stem a rise within the yields, by conducting limitless buying at zero.110 %.

On Friday the BOJ lowered the yield to zero.100 %.

Still the 10-year JGB yield rose to as excessive as zero.110 % earlier on Monday, in defiance of the BOJ’s obvious defence line.

The BOJ provided to purchase 10-year JGBs on the yield of zero.100 % once more on Monday, its third such buy in simply over per week.

As buyers rushed to promote earlier than attainable policy tweaks, the BOJ purchased a document 1.64 trillion yen ($14.76 billion) of JGBs in Monday’s operation, surpassing the earlier document of 724 billion yen in February final 12 months.

“We think the BOJ will allow wider trading band for the 10-year JGBs while sticking to its official policy guidance of zero percent in the 10-year yield,” mentioned Naomi Muguruma, senior strategist at MUFG Securities.

The BOJ is predicted to announce its policy a while round midday (0300 GMT) and a couple of p.m. (0500 GMT) native time.

The value of 10-year JGB futures fell zero.13 level to 150.44 .

The 20-year JGB yield rose to 1.5 foundation level to a six-month excessive of zero.600 %.

The 30-year yield rose 1.5 foundation level to six-month excessive of zero.825 %.

At the quick finish of the yield curve, the five-year yield rose zero.5 foundation level to minus zero.090 % and the two-year yield gained zero.5 foundation level to minus zero.115 %.

$1 = 111.09 yen
Reporting by Hideyuki Sano; Editing by Sunil Nair

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