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Japan nets 60bn yen on bond auction as yields plummet

Japan's long-term yields continue to slide.

TOKYO -- Auctioning off Japanese government bonds is becoming a profitable business for the finance ministry as yields move further below zero, though costs passed from buyers to the central bank could lighten the country's wallet in the long run.

Under ordinary circumstances, financial institutions would pay no more for a bond than its face value plus total interest payments -- for example, 101 yen for a 10-year, 100-yen JGB carrying a 0.1% coupon. If a buyer pays more than that, the bond's yield becomes negative, and the seller -- in this case, Japan's government -- profits from the transaction. In an auction of 10-year JGBs Tuesday, the average yield fell to a record low of minus 0.243%, netting the government around 60 billion yen ($590 million) on the roughly 2.4 trillion yen sale -- or more than 2.6 times the profit from June's offering.

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