Japan 10-Year Yield Drops to Record, Below Negative Deposit Rate

Japan’s 10-year bond Yield dropped to a record minus 0.135 percent, meaning the benchmark rate is now below the negative deposit rate introduced by the Bank of Japan last month.

The yield on the 0.1 percent notes maturing March 20, 2026, dropped as much as 8.5 basis points after investors reluctance to sell to the BOJ at the central bank’s bond buying operation underscored demand for government debt. The yield on 20-year sovereign securities tumbled to 0.29 percent, also an unprecedented low.

“It goes to show how the BOJ’s negative interest-rate policy is so strong,” said Tadashi Matsukawa, the Tokyo-based head of fixed-income investment at PineBridge Investments Japan. Investors are buying shorter-dated debt “as there aren’t enough 30-year, 20-year bonds available,” he said.

Yields on Japanese government debt tumbled since the BOJ announced Jan. 29 that it would start charging interest on some deposits held at the central bank starting Feb. 16. The amount of Japanese bonds in the market offering negative yields has doubled this year to exceed more than 600 trillion yen ($5.4 trillion) earlier this month, driving up Volatility in the local market and helping to bring down global yields.

To contact the reporters on this story: Yumi Ikeda in Tokyo at yikeda4@bloomberg.net, Garfield Reynolds in Sydney at greynolds1@bloomberg.net. To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net, Tomoko Yamazaki

By: Yumi Ikeda and Garfield Reynolds

©2016 Bloomberg News