The 10-year JGB yield, at 0.56% Tuesday, is the lowest among comparable government debt.
In a massive decline in 2003, daily volatility on the 20-year JGB reached over 60%.
The contribution of JGB trading profits is unlikely to continue in the face of now rising interest rates.
The pledge of aggressive buying has caused Japanese Government Bonds (JGB) to rally violently and flatten their yield curve.
It would prefer to issue longer dated bonds, to lock in low rates (the current 10 year JGB yields 0.76%).
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Compare to Japan where the yield on the 10 year JGB just dipped below 1% for the first time in 7 years.
The result will be massive JGB selling, a collapsing yen, and systematic financial crisis resulting from a collapse in yen asset prices.
The JGB market has experienced volatility in the past, suffering occasional drops on political jitters and fears of selling by big domestic investors.
"It's a question of the BOJ showing that it is being considerate" to JGB market participants, said Mitsubishi UFJ Morgan Stanley Securities strategist Katsutoshi Inadome.
JGB-market crash may have risen sharply recently, despite the superficial calm.
The market now expects domestic Japanese Government Bond (JGB) holders to cash out and seek higher yield solace in U.S. Treasuries and other high-grade foreign bonds.
The government's debt is offset by financial assets and girded by domestic household savings in the banks which buy Japanese Government Bonds (JGB's)--of which 95% are held by domestic investors.
More long-term JGB investors say they are struggling to figure out how to adjust to what is likely to be years of lower yields as the BOJ starts its increased purchases.
More long-term, JGB investors say they are struggling to figure out how to adjust to what is likely to be years of lower yields as the BOJ starts its amped-up purchases.
The 10- and 30-year JGB yields fell to all-time lows of 0.315% and 0.925%, respectively, as market participants that were betting the BOJ would disappoint markets rushed to cover short positions.
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It could result in another JGB downgrade.
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"Speaking in terms of JGB investments, investors who need yield will ultimately extend the maturity of JGBs they are buying, and those who don't want to do that or can't do that will buy other things like foreign bonds or credit, and in some cases equity, " said Kenji Sakaguchi, chief investment officer at Prudential Investment Management Japan Co.
The most fundamental is that within a few years existing and new issue government debt may absorb all private savings (corporate and household) in Japan, making foreign borrowing inevitable and creating a terrifying scenario of higher yields demanded by foreigners raising MOF interest costs while inflicting portfolio losses on JGB holders, and putting fiscal balance further (infinitely?) beyond reach, with (by then) predictably horrendous consequences.
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