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Price Developments of Japanese Government Bonds in 2003

Author

Listed:
  • Takashi Nakayama

    (Bank of Japan)

  • Naohiko Baba

    (Bank of Japan)

  • Tatsushi Kurihara

    (Bank of Japan)

Abstract

Interest rates on Japanese government bonds (JGBs) fluctuated widely in 2003. The interest rate on 10-year JGBs gradually declined from the beginning of 2003, reaching the mid 0.4% range in June. But then, interest rates rose sharply (i) from late June to early July and (ii) from late August to early September. These fluctuations basically reflected changes in the outlook for Japan's economy. A closer look shows that other factors also influenced the price formation of JGBs during certain periods. They include the synchronized movement of interest rates between Japan and the US, changes in expectations about the Bank of Japan's monetary policy, and the hedging strategy employed by financial institutions, some of which collectively influenced JGB price developments.

Suggested Citation

  • Takashi Nakayama & Naohiko Baba & Tatsushi Kurihara, 2004. "Price Developments of Japanese Government Bonds in 2003," Bank of Japan Review Series Market Review E-series, 2, Bank of Japan.
    • Handle: RePEc:boj:bojrev:04-e-2m
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    File URL: http://www.boj.or.jp/en/research/wps_rev/mkr/data/kmr04e02.pdf
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    Cited by:

    1. Yoichi Ueno & Naohiko Baba & Yuji Sakurai, 2006. "The Use of the Black Model of Interest Rates as Options for Monitoring the JGB Market Expectations," Bank of Japan Working Paper Series 06-E-15, Bank of Japan.
    2. Naohiko Baba, 2006. "Financial Market Functioning and Monetary Policy: Japan's Experience," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 24(S1), pages 39-71, December.
    3. Schmelzing, Paul, 2017. "Staff Working Paper No. 686: Eight centuries of the risk-free rate: bond market reversals from the Venetians to the ‘VaR shock’," Bank of England working papers 686, Bank of England.

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