SINGAPORE (Reuters) – Japan’s 10-year government bond yield rose on Tuesday after the Bank of Japan’s decision to allow long-term interest rates to rise more by widening the band around its yield cap.
The BOJ kept its yield curve control (YCC) targets unchanged, set at -0.1% for short-term interest rates and around zero for the 10-year bond yield, at a two-day policy meeting that ended on Tuesday.
But in a surprise move, the BOJ decided to allow the 10-year bond yield to move up and down 50 basis points (bps) around the 0% target, wider than the previous 25-bps band.
The 10-year JGB yield rose 21 bps to 0.460%, its highest since 2015.
The five-year yield rose 12 bps to 0.260%, while the benchmark 10-year JGB futures fell 1.85 points.
“This signals the beginning of slow unwind of ultra-low interest rates in Japan,” said Kheng Siang Ng, Asia Pacific head of fixed income at State Street Global Advisors.
“The change in YCC range will help reduce the extent of the bond market from being artificially held up by central bank bond purchase and improve secondary trading liquidity.”
(Reporting by Ankur Banerjee; Editing by Janane Venkatraman)
