(Adds BOJ liquidity announcement, analyst quote and details)
TOKYO, March 13 (Reuters) – Most Japanese government bond (JGB) prices tanked on Friday, with the benchmark 10-year yield rising to a seven-week high, as investors were forced to book profits from bonds to offset losses in stocks and other financial assets.
To stem the rise in yields, the Bank of Japan conducted an unscheduled bond-buying, its first such action since August 2018, offering to buy 200 billion yen ($1.90 billion) worth of bonds with five to 10 years to maturity.
Yet the move failed to calm nerves as the purchase amount was relatively small, especially compared with the massive buying the central bank has done over the years.
Later in the day, the BOJ also said it would provide “ample liquidity” using market operations and maintain stability in the repo market to help stabilise financial markets.
“The BOJ is technically doing this as a gesture” to signal global coordination between central banks to the market, said Masahiko Loo, a portfolio manager at AllianceBernstein.
“Whoever can cut rates, they will cut, and whoever can pump liquidity in the market will pump more liquidity,” he said.
The unscheduled bond-buying even confused some market players on its intention given that the 10-year yield was close to the BOJ’s policy target of zero percent. The BOJ has said it wants the yield to move within 20 basis points below or above that level.
The BOJ’s action came after the U.S. Federal Reserve pumped $1.5 trillion in short-term loans on Thursday to quell liquidity concerns, an action many took as a restart of quantitative easing policy.
Benchmark 10-year JGB futures fell 1.07 point to 153.28, the biggest drop since July 2016.
The 10-year JGB yield rose 7.0 basis points to 0.005%, its highest since mid-January.
The 20-year JGB yield rose 5.0 basis points to 0.290%, while the 30-year yield rose 1.5 basis points to 0.320%.
The two-year JGB yield rose 2.0 basis points to minus 0.205%.
The five-year yield rose 7.0 basis points to minus 0.130%.
However, there were some bargain-hunting at the longest end of the yield curve. The 40-year JGB yield fell 1 basis point to 0.295%.
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