Japan to cut down 20-yr bond issuance

Japan's Ministry of Finance is set to accelerate a planned reduction of 20-year bond issuance by 200 billion yen ($1.39 billion), moving cut from April to January. justment aims to counter diminishing investor interest in long-dated debt amid rising interest rates. plan involves decreasing volume of 20-year Japanese Government Bonds (JGBs) sold per auction from 1.2 trillion yen to 1.0 trillion yen.

Analysts and trers note that, with few exceptions, this year's sales of 20-year JGBs have been lacklustre. recent auction in December recorded lowest demand since September of previous year, which was weakest bid in a dece.

Ministry of Finance increased issuance of 20-year JGBs when Bank of Japan's aggressive stimulus pushed 10-year JGB yields below zero. This move rendered shorter-dated securities unattractive for regional banks and smaller lenders. However, a policy justment by Bank of Japan a year ago opened possibility of a significant rise in yields across curve, allowing se banks to opt for shorter tenors better suited to ir portfolios.

Shoki Omori, Chief Japan Desk Strategist at Mizuho Securities, expressed skepticism about wher planned reduction would be sufficient to dress low demand for 20-year bonds. He noted, "It's obviously oversupplied. re is still going to be a lack of demand."

benchmark 20-year JGB yield reached a 3.5-month low of 1.345 per cent on day of announcement, with yields falling across curve after Bank of Japan maintained ultra-easy stimulus settings and retained its dovish forward guidance.

decision to accelerate cut in 20-year bond issuance reflects challenges posed by changing market dynamics and underscores impact of rising interest rates on demand for long-dated debt instruments. move seeks to align with evolving preferences of investors in Japanese bond market.

(With Reuters inputs)