TOKYO: Japanese government bond prices gained on Monday, pushing the yield on the 10-year cash bond to a five-week low, as investors hoped for more easing steps from the Bank of Japan and a slowdown in US jobs growth raised expectations of more US easing.
Bank of Japan policymakers began their two-day meeting on Monday, at which most strategists expect them to refrain from easing monetary policy.
But in light of the still-fragile economic recovery, easing steps cannot be ruled out at this meeting or the next one on April 27, and some market participants have positioned for the possibility.
"The BoJ probably won't announce any new easing steps tomorrow, but restraint this time would set the stage for it to take steps at its meeting later this month. These expectations are pressuring yields," said a portfolio manager at a Japanese asset management firm.
The yield on the latest 10-year notes shed 2.5 basis points to 0.960 percent, its lowest level since March 1.
The June 10-year JGB futures contract added 0.28 point to 142.32, after touching a four-week high of 142.42.
Ahead of the BOJ meeting, Prime Minister Yoshihiko Noda met Bank of Japan Governor Masaaki Shirakawa in Tokyo on Friday. While Shirakawa did not say whether the two discussed monetary policy, the meeting raised market hopes that more easing might be raised.
Noda last met Shirakawa the day after the central bank's surprise move on Feb. 14 to increase the size of its asset-buying programme and set an inflation target of 1 percent.
Bond market sentiment was also supported by rising hopes of more monetary stimulus from the US Federal Reserve, after data released on Friday showed US payrolls grew by just 120,000 in March, far below the expected increase of 203,000.
Weak equities also made safe-haven bonds more appealing, with the benchmark Nikkei down for a fifth straight session, losing 1.1 percent after marking its worst weekly performance in eight months last week, shedding 3.9 percent.
The yield on the 20-year bond yield lost two basis points to 1.745 percent, after falling as low as 1.735 percent, a more than six-week low, while the 30-year bond yield shed one point to 1.945 percent.
The five-year yield dropped 2 basis points to a four-week low of 0.295 percent.
That tenor is supported by expectations that the BOJ will extend the maturities of the bonds it purchases in its asset-buying programme. The central bank now buys bonds with up to two years left to maturity.
The survey's JGB bull-bear diffusion index, calculated by subtracting the number of bearish market players from those that are bullish, jumped to plus 6 from minus 56 in the previous poll, which was the lowest reading since the survey began in June last year.
Markets shrugged off data released on Monday showing Japan's current account balance swung back to a surplus in February after a record deficit the previous month, as improvement in exports added to steady income gains from overseas investments.
The surplus eased worries that Japan may soon need to rely on overseas funds to finance its massive public debt.
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