Japanese government bond prices pared losses on Monday after Bank of Japan Governor Haruhiko Kuroda signalled his readiness to ease monetary policy further, which kept a rein on bond yields that hit five-month highs earlier in the day.
The 10-year bond yield was flat at minus 0.025 percent , having retreated from the day’s high of minus 0.010 percent touched in the morning, its highest level since mid-March.
Fresh reassurance from Kuroda that the central bank continues to look to boost prices by monetary easing stemmed selling in JGBs.
Kuroda signalled his readiness to ease monetary policy while admitting the BOJ’s negative interest rate policy may impair financial intermediation and hurt public confidence in Japan’s banking system.
Long-dated JGBs have been under pressure in recent weeks on speculation that the BOJ could possibly tweak its policy to steepen the yield curve to cushion the blow of negative interest rates on banks’ profitability.
Despite Monday’s rebound in JGB prices, steepening in the JGB yield curve has continued, partly due to Kuroda’s mention of the cost of the current policy framework.
The yield spread between five-year bonds and 30-year bonds widened to 69 basis points, the highest since late March, and having almost doubled from the record low of 35 basis points touched in June.
The 30-year yield rose 3.5 basis points at one point to 0.540 percent, hitting their highest level since late March, and last stood at 0.525 percent, up 2.0 basis points on the day.
The 20-year yield also rose 3.5 basis points to 0.430 percent before slipping back to 0.405 percent, still up 1.0 basis point on the day.
Shorter maturities fared better, with the five-year yield flat at minus 0.155 percent and the two-year yield at minus 0.190 percent.
The 10-year JGB futures price rose 0.09 point to 151.19 .