Bonds may rise, US interest rates fall due to Fed chairman's remarks - Be wary of operational cuts and 10-year auctions - Bloomberg

2023-12-03 22:53:00

Bond prices are expected to rise on the 4th. This is a continuation of the trend in which long-term interest rates in the United States have fallen significantly in response to Federal Reserve Chairman Jerome Powell’s comments and economic indicators. The topside is likely to be heavy due to expectations that the Bank of Japan will reduce its government bond purchases and caution over the 10-year government bond auction on the 5th.

Makoto Suzuki, senior bond strategist at Okasan Securities, expects steady market development as futures prices have risen significantly in night trading due to the drop in overseas interest rates. However, he said, “The market’s attention will be on tomorrow’s 10-year government bond auction.The 0.6% range is seen as heavy, and a sense of caution will keep the topside down.”

His forecast range for the yield on newly issued 10-year government bonds is 0.65-0.69% (the day ended at 0.7%), and the December futures contract is 146.50 yen to 147.00 yen (146.29 yen). ).

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In nighttime futures trading, the December contract ended at 146.86 yen, up 57 sen from the daytime closing price on the 1st.

Bank of Japan operation

Regular purchases of government bonds are subject to remaining maturities of more than 1 year and less than 3 years, more than 3 years and less than 5 years, more than 10 years and less than 25 years, and more than 25 years.The previous purchase amounts were 375 billion yen, 450 billion yen, 200 billion yen, and 75 billion yen, respectively.
Mr. Suzuki of Oka Sansho
- There is a possibility that the amount will be reduced for more than 3 years and less than 5 years, and more than 10 years and less than 25 years, but basically the Bank of Japan is expected to reduce it cautiously and will leave it unchanged this time.
- Even if there is a reduction, it will be small and the market seems to have factored it in to some extent, so the impact on the market price will not be large.
With the November 15 operation, the amount remaining for bonds with more than one year to three years was reduced from 425 billion yen to 375 billion yen, and those with more than five years and less than 10 years left to maturity were reduced from 675 billion yen to 575 billion yen.In the operation on the 22nd of the same month, the amount will be reduced to 525 billion yen for 5 years but less than 10 years, and from 100 billion yen to 75 billion yen for more than 25 years.