BOJ continues emergency bond purchases while yields are still rising

On Friday, October 21, the Bank of Japan (BOJ)  proceeded with an emergency bond buying process for the second day in a row. This is due to the yields of 20-year government bonds growing with a new high being reached. These figures make it difficult for the BOJ to pursue its soft monetary policy. 

Analogous transactions were made on Thursday, in order to confirm rising values of securities that have overcome a multi-year peak. 

The Bank of Japan must control a surge in the long-term JGB yields, according to Ataru Okumura, a strategist at SMBC Nikko Securities. Thus, the regulator is expected to repeat bond-buying operations once again. But the upward pressure is only gaining momentum as short-term bonds are rising along with the long-term ones. 

The 20-year bond yields rose 4.5 basis points to 1.205%, i.e. the highest level since July 2015, following the data release by the BOJ. However, yields have since declined to 1.195%.

The 30-year JGB yield also gained 3 basis points to 1.550%, considered the greatest indicator since June 2015.

In addition, the two-year JGB yield surged another 1.5 basis points to -0.010%. This is regarded as the highest level since January 2016.

Following the Bank of Japan's policy to control the yield curve, the regulator is required to keep the yield on 10-year JGBs at 0%. Therefore, borrowing costs are reduced while the country's economy is stimulated.