Halister News

--CHRISTIAN WIENBERG

(Bloomberg) -- The Bank of Japan may risk further damping market volatility when it fine-tunes its bond purchase operations, according to Eiji Dohke, chief bond strategist at SBI Securities in Tokyo.

• BOJ’s yield curve control is functioning but operations in response to small changes in yields risk a further reduction of bond market volatility
  • NOTE: BOJ offers to buy 440b yen in 5- to-10 year bonds vs 470b prior
  • 10-year JGB yield falls 0.5bp to 0.04% on Wednesday, lowest since June 7, after the purchase
• The reduction in 5-to-10 year zone may spark speculation that the BOJ won’t tolerate 10-year yield falling below 0.05%
  • Could potentially raise the range markets perceive the BOJ as allowing to 0.05-0.1% from zero-0.1%
  • NOTE: BOJ aims to keep 10-year yield at around zero percent
• BOJ can control yield even after lowering purchases if external environment is favorable amid shrinking availability of JGBs
• At the same time, fine-tuning operations undermine market mechanism and risk failing to send warning signal over fiscal woes

--With assistance from Chikako Mogi. To contact the reporter on this story: Kazumi Miura in Tokyo at kmiura1@bloomberg.net

(Bloomberg) -- The Bank of Japan’s reduced bond purchases in the 5-to-10-year sector is consistent with its desire to cut back whenever markets stabilize, according to Takenobu Nakashima, quantitative strategist at Nomura Securities Co. in Tokyo.

• Biggest reason for purchase cut is the BOJ wants to maintain scope for purchase expansion when 10-year yields rise in the future
  • Another factor is that the bank wants to gradually reduce buying
  • NOTE: BOJ offers to buy 440b yen in 5-to-10 year bonds vs 470b prior
• It takes ”considerable courage” to lower it below 450b but now is the best time to do it before September when markets may move on BOJ and Fed meetings
• BOJ may have judged market reaction today to be muted given the lack of response compared to last month when it reduced buying to 470b from 500b
• Lack of market reaction is due to lack of momentum for yields to rise given low volatility in Japan and the U.S.
  • Also due to lack of sellers as the 10-year zone is favored by investors seeking to park money compared to the BOJ’s reserve that carries a 0.1% charge

--With assistance from Chikako Mogi. To contact the reporter on this story: Kazumi Miura in Tokyo at kmiura1@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Patricia Lui

(Bloomberg) -- Here’s a roundup of Indian co. debt-rating changes.

• To get this story sent to your inbox real-time, run NI INRATINGS, click on Display & Edit, then Set Alert Delivery

DOWNGRADES

• Lakhani Shoes
  • Long-term bank facilities cut to D from C at Crisil
  • Cites instances of devolvement of letter of credit
• Prime Ispat
  • LT bank facilities cut to BBB- from BBB at Crisil
  • Expects stretch in liquidity due to capex

UPGRADES

• B.G. Shirke Construction
  • LT loan raised to A from A- at India Ratings
  • Cites strong credit metrics, improved operating margin
• Ishwar Singh and Associates Construction
  • LT bank facilities raised to BB+ from BB at Crisil
  • Cites sustained revenue growth, continued healthy order book

--SARAH MCGREGOR