Japan’s government bonds rose, pushing the benchmark 10-year yield to a three-week low, as comments from the nation’s central bank and the Federal Reserve underscored prospects for continued monetary stimulus.
Sovereign bonds rose by the most in almost a month after the Bank of Japan raised its assessment of the economy and stuck with a pledge to expand the monetary base by as much as 70 trillion yen ($708 billion) per year, in a statement today. The yen climbed today to its strongest level this month versus the dollar after Fed Chairman Ben S. Bernanke yesterday indicated policy makers will maintain efforts to keep borrowing costs low.
“The yen’s gain after Fed Chairman Bernanke’s speech is supporting JGBs,” said Tetsuya Miura, the chief bond strategist at Tokyo-based Mizuho Securities Co., one of the 24 primary dealers obliged to bid at Japan’s debt auctions. “The BOJ’s decision to revise up its economic forecast was expected. The economic outlook from autumn is the key for JGBs.”
Japan’s 10-year yields declined 3 1/2 basis points to 0.82 percent as of 3:34 p.m. in Tokyo, according to Japan Bond Trading Co. The price of the 0.8 percent note due in June 2023 rose 0.32 yen, or 320 yen per 100,000 yen face amount, to 99.816 yen. A basis point is 0.01 percentage point. The yield was the least since June 20.
The 2-year yield fell to 0.125 percent, the lowest since June 19, while 20-year yields dropped to 1.715 percent, the least since July 5.
The BOJ today refrained from adding to the unprecedented monetary stimulus it announced in April. The bank maintained its April forecast that prices, excluding the effect of a planned sales tax increase, will rise 1.9 percent in the year starting April 2015. It trimmed some forecasts for inflation and economic growth. The BOJ now sees inflation of 0.6 percent in the current fiscal year and 1.3 percent in the following 12 months.
Governor Haruhiko Kuroda has set a target of 2 percent inflation, focusing on a gauge that excludes fresh food.
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