By Kevin Buckland
TOKYO, Aug 31 (Reuters) - Japanese 10-year government bond yields declined on Thursday after the Bank of Japan announced it would conduct bond purchase operations on the day before an auction of 10-year notes next week.
The central bank generally conducts so-called “rinban” outright-purchase operations on Wednesdays, but will conduct them on both Monday and Friday next week.
The Ministry of Finance plans to auction about 2.7 billion yen ($18.51 million) of 10-year notes on Tuesday.
The 10-year JGB yield (JP10YTN=JBTC) has been mired around 0.65% for the past two weeks, despite the BOJ’s unexpected doubling of the de-facto cap on yields to 1% at a policy meeting last month.
However, investors still generally expect yields to head above 0.7% towards the year-end, calling into question demand at the upcoming sale.
Auctions of two-year notes and 20-year bonds this month both produced weak results.
The outlook for the 10-year auction result “didn’t really look good, and the BOJ is a bit concerned,” said Shiko Omori, chief Japan desk strategist at Mizuho Securities.
“So they came up with the idea of doing rinban operations ahead of the 10-year auction,” Omori said.
The 10-year yield declined to 0.64% following the announcement from 0.645%. That is a 1 basis point decline from the previous day’s close.
Yields fall when bond prices rise.
Despite the unusual timing of the rinban operations in the first week of next month, the overall number of times the central bank will conduct bond purchases in September and the amounts for each maturity band remain unchanged from August.
($1 = 145.8400 yen)

Japan 10-year yield falls after BOJ announces bond buying before auction