Japan’s big banks buy most government bonds amid confidence in BOJ

Bloomberg

Japan’s biggest banks bought the most government bonds last month since March 2012, signalling confidence in the central bank’s ability to control the yield curve and cap interest rates.
The category for large lenders including Bank of Tokyo-Mitsubishi UFJ Ltd., Mizuho Bank Ltd. and Sumitomo Mitsui Banking Corp., collectively bought a net 2.3 trillion yen ($21.5 billion) of government debt last month, according to data from the Japan Securities Dealers Association on Tuesday. That’s the up from 1.66 trillion yen in December.
They also turned net buyers of 10-year bonds for the first time in six months, as the benchmark yield veered away from the central bank’s target of around zero to reach a 6-month high of 0.095 percent in late January. The upmove spurred the Bank of Japan to offer an unlimited amount of debt purchases to keep the rise in check.
Since the yield curve control policy was adopted in 2016, the BOJ has stepped in to buy an unlimited amount of 10-year bonds at 0.11 percent in each of the three operations when the benchmark rate threatened to wander a little too far from zero. The central bank didn’t offer to buy the 10-year note at its first operation in November 2016.
“Banks probably shifted into JGBs to allocate funds ahead of the end of Japan’s fiscal year as the 10-year bond yield was approaching the ceiling of 0.1 percent,” said Eiichiro Miura,
general manager of Nissay Asset Management Corp’s fixed income investment department.