JGB yields rise after BOJ surprises with 0 pct target for 10-yr bonds yield

Bank of Japan announces major policy overhaul

Japanese government bond yields rose on Wednesday after the Bank of Japan surprised markets by saying it would aim to guide the 10-year bond yield to around zero percent as part of an overhaul of its policy framework.

The benchmark 10-year JGB yield rose to as high as plus 0.005 percent, rising to a positive level for the first time since mid-March.

It last stood at minus 0.035 percent, up 2.5 basis points on the day, but trading was volatile as investors reacted to the surprise decision, analysts said.

"I think the market's volatility will fall as the BOJ has set the target for the 10-year yield... We are going to have a government-controlled market," said Naoya Oshikubo, rates strategist at Barclays.

Japanese bond yields

Japan Government Bonds

The BOJ abandoned its base money target and set a zero percent target for the 10-year yield. To guide the 10-year bond yield, the BOJ will buy 10- and 20-year bonds at a price it set if necessary, the bank said.

The longer end of the curve was volatile as market players were not sure exactly where the BOJ is trying to guide their yields.

The 20-year yield rose to as high as 0.450 percent and last stood at 0.405 percent, flat on the day.

Yields on shorter maturities also rose as the BOJ refrained from cutting short-term interest rates deeper into negative levels.

The two-year yield rose 1.0 basis point to minus 0.260 percent.

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