BOJ steps in to curb rising yields with special buying operation

TOKYO, Sept 27 (Reuters) – The Bank of Japan said it would conduct a special purchase operation of Japanese government bonds on Tuesday, with the yield on the benchmark 10-year note brushing against the 0.25% policy ceiling for the first time in the past fortnight.

The BOJ will purchase debt with 10- to 25-year maturities worth 100 billion yen (USD 692.28 million), and securities with 5- to 10-year maturities worth 150 billion yen.

The 10-year JGB yield was up 0.5 basis point at 0.25%, as of 0225 GMT, a level not seen since Sept. 16. The central bank pins the yield at +/- 25 basis points around zero under its yield curve control policy.

Japanese yields are under pressure amid a broad climb in global yields as major central banks including the US Federal Reserve and the European Central Bank race to hike interest rates to rein in superheated inflation.

The BOJ stood alone among developed markets in keeping the short-term policy rate negative, in addition to the zero long-term yield, as tepid wage inflation and relatively benign core inflation keep Japanese policymakers cautious amid a fragile economic recovery.

Japan’s central bank maintained its stance last week, despite growing policy divergence pushing the yen to 24-year lows. Japanese authorities intervened in the foreign exchange market for the first time since 1998 to shore up the battered currency.

“The BOJ is trying to calm down speculation that it could be forced to change policy,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management in Tokyo.

“It makes very clear that it has no intention to change monetary policy for the foreseeable future.”

Benchmark 10-year JGB futures fell 0.29 point to 147.71, and earlier touched a three-month low of 147.62.

The yield on the 30-year rose 6 bps to 1.435% for the first time since September 2015, and the 20-year yield advanced 4 bps to 1.03% for the first time since December 2015.

The five-year yield added 1 bp to 0.08%, a three-month high.

Two-year notes  were yet to trade.

(USD 1 = 144.4500 yen)

(Reporting by Kevin Buckland; Editing by Sherry Jacob-Phillips)