Japan MOF signals need to curb JGB issues except 40-yr bonds

TOKYO (Reuters) - Japan's Ministry of Finance (MOF) on Monday signaled to bond dealers the need to reduce issuance of treasury bills and overall debt issues, except 40-year "super-long" bonds, to stabilise the massive government bond (JGB) market.

Ministry officials gave the clue at meetings with bond dealers and primary dealers, as issuance of treasury bills has jumped 40% to fund the huge cost of stimulus to cope with the impact of the COVID-19 pandemic.

"While striving to curb overall bond issues, we intend to reduce treasury bills in order to stably issue and digest JGBs," a senior official told reporters.

Many investors expressed understanding for the ministry's view. The ministry and bond dealers regularly exchange views on the JGB market to smoothe bond issuance as it draws up an annual issuance plan in December.

Investors from insurance and fund management firms said there's room for increasing super-long JGBs, particularly 40-year bonds.

At a separate meeting with primary dealers, many wanted 40- year bonds in particular to increase but others sought a status quo. Some at securities firms called for 40-year bonds to be issued every month instead of the current once in two months.

However, some investors objected, saying they use treasury bills as collateral needed in dealing with the central bank. Others called for keeping them unchanged or taming the pace of decrease.

The finance ministry will keep market issuance of interest-bearing government bonds (JGB) unchanged as it reviews its issuance plan for this fiscal year following new stimulus with a record amount of spending in an extra budget.

While the extra budget pushed calender-base market issuance to 212.2 trillion yen ($1.87 trillion), 138.2 trillion yen of interest-bearing bonds remain unchanged for issuance in the fiscal year 2021.

($1 = 113.4500 yen)

(Reporting by Tetsushi Kajimoto; Editing by Bernadette Baum)

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