As fiscal year-end activity led to a shortage of Japanese government bonds for collateral, the Japanese repo rates in Tokyo slumped to a new record Thursday.
The one-day repurchase rate for transactions starting the next business day fell to minus 1.2%, the lowest since 2007 according to the Japan Securities Dealers Association.
There were a shortage of short-term notes that are used as collateral and some players who typically raise funds by lending out government bonds were on the sidelines due to Friday s year-end, according to Kenji Sato, manager of the management planning division at Central Tanshi Co.
In the bond market, demand for short-term notes has been strong this month, while foreign investors have been increasing purchases as well, he said. He said that the Bank of Japan purchases don't seem to have directly affected the market.
Foreign investors bought 4.1 trillion yen $31 billion of Japanese bonds in the week to March 17 before turning to sellers the following week, according to data from the Ministry of Finance.
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