China's increased buying of mostly short-term Japanese government debt 'at the least has been a supporting factor for the market today,' said Katsutoshi Inadome, a fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
'There were a lot of people looking to buy JGBs in the morning, so the news encouraged them to go ahead and do so,' said Mr. Inadome, speaking to Market Talk.
But the bump from China's ramped up buying is unlikely to continue supporting the market in months ahead unless purchases expand out of short-dated maturities, Mr. Inadome said.
'They still haven't bought much in the longer-end, with a comparatively small level of purchases of maturities greater than two years, so whether they expand their buying beyond of the short-end will be crucial,' Mr. Inadome said.
Nonetheless, China's buying highlights the possibility that the country could eventually help the JGB market move toward a more diversified base, Mr. Inadome says.
'The consensus view is that in five or ten years, it's going to be more difficult for Japanese government debt issuance to be fully absorbed by domestic buyers, so if China continues to increase its buying, that could lead to a sense of security for the market,' said Mr. Inadome.
Lead September JGB futures were last down 0.03 at 141.54, after a slightly weak 10-year auction result.
China's government is unlikely to make significant changes to its current Foreign-Exchange reserves policy, which are mostly focused on holdings of large amounts of U.S. Treasurys, says Duncan Wooldridge, a UBS economist.
Following today's news China increased Japanese government bond holdings in January-April, he notes U.S. bond market remains the only one with enough size and liquidity to absorb China's massive holdings.
'I've seen rather ominous comments about China diversifying away from this or that currency (but) the core of their policy has to be to hold US Treasurys,' said Mr. Wooldridge. The dollar was recently at ¥87.63, bouncing from an intraday low at ¥87.38.
中国提高了日本国债的购买量，其中主要是短期国债。三菱日联-摩根士丹利证券公司(Mitsubishi UFJ Morgan Stanley Securities)固定收益策略师稻留克俊(Katsutoshi Inadome)说，这至少是今天市场的一个支撑因素。