Ultra-long-term interest rates will gradually decline heading into the Bank of Japan’s monetary policy meeting on the 28th. Over the weekend, reports on the Bank of Japan forced investors to buy higher-priced bonds as they lost the chance to buy dips due to expectations of a yield curve control (YCC) correction.
The yield on newly issued 20-year government bonds fell to 1.015% on the 21st, following reports that the Bank of Japan sees little urgent need to deal with the side effects of the YCC policy at this point. After gradually rising from late June to 1.14% on the 18th, it is already being conscious of breaking below 1%. Uncertainty over the YCC revision remains, but interest rate hikes were limited ahead of the July meeting, when the revision was most feared.
According to June trading trends by investor released by the Japan Securities Dealers Association, city banks sold long-term government bonds for four consecutive months and super-long-term government bonds for seven consecutive months. Since the revision of the YCC in December last year, domestic banks, which have been wary of interest rate hikes due to the revision, have not been actively allocating surplus funds to long-term and super-long-term bond investments. We cannot afford to end the first half of the current fiscal year like this.
(Disclaimer: This article provides the author’s own perspective and is not intended as investment advice)
2023-07-24 00:28:20
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