The yield on 10-year Japanese Government bonds plunged to a seven-year low on Thursday, as domestic banks purchased the notes to place surplus cash to work and in the middle of expectations for the new Government to make good on its promise to rein in liability.
The yield bend tuned into the flattest in 15 months between the 2 year and 10 year zones with market leaders making a note that deposit at Japanese banks carry on growing even at the same time when lending demand is weak.
Banks on a regular basis search for instances to expand the period of their bond portfolios, in order to match liabilities for example deposits, which is known as asset liability management.
A fund Manager at a U. S. asset management corporation said that banks seem to making purchases in terms of ALM rather than buying taking into consideration market views.
The standard 10-year JGB yield plunged to as low as 1.140% JP10YTN=JBTC, which is its lowest ever since the year 2003. At midday, it was 1.145%, which was down 2.0 basis points from Wednesday.
It has fallen almost by 8 basis points since new Prime Minister, Naoto Kan said a week ago that doubling-up the sales tax rate would be an opportunity to limit the nation's enormous money owing condition.