UPDATE 1-Bank of Japan says it will provide 5-year loan to market

Reuters
·1 min read

(Adds background, yields level)

TOKYO, Feb 10 (Reuters) - The Bank of Japan said on Friday it will extend five-year loans against collateral to financial institutions, part of its efforts to defend its yield curve control policy.

This is the third time since January that the BOJ has offered such loans.

The move is aimed at encouraging banks to buy the bonds with the same maturity, and narrow the spread between the yield on five-year JGBs and five-year interest rate swaps.

The yield on five-year JGB fell to 0.195% from 0.200% after the loan announcement.

The BOJ will conduct the funds-supply operation on Tuesday under which it will offer loans with a 5-year duration from Feb. 15, it said in a statement. The total loan amount will be announced at that time.

The BOJ last conducted such an operation on Jan. 31. (Reporting by Junko Fujita; Editing by Clarence Fernandez and Himani Sarkar)