Japan’s government is currently getting funds to borrow money, right after selling the country’s bonds with rather a negative yield. That has been the first selling of this kind in Japan.
The auction came after the BOJ’s three years of active monetary easing, driving interest rates lower, thus trying to stimulate lending. Late in January, the BOJ first got down to active purchases of JGBs as well as other assets, and then imposed negative interest rates on certain bank reserves, also for the first time.
The given move with negative rates made the yield on existing 10-year JGBs head for negative territory, though 10-year JGBs had never been sold with a negative yield at this auction, where the bond purchaser agreed to shell out for the possibility of lending money.
On Tuesday, the Ministry of Finance dared to sell the country’s 10-year bonds with an interest rate of about 0.1%. As for the average price, it was ¥101.25 with a yield of -0.024%.
Financial analysts had manifested concerns regarding demand ahead of the auction. They also suggested that many purchasers were eager to sell JGBs to the BOJ for a profit in the nearer future. Obviously, such trades would be carried out with the expectation that yields will most likely keep dropping, because the BOJ actually pushes ahead with more rate cuts as well as asset purchases.