TOKYO: Japanese government bonds edged down on Wednesday as some investors took profits after three days of gains, and as risk appetites perked up before the end of a US Federal Reserve meeting expected to produce some easing steps.
The US central bank is seen as likely to extend its "Operation Twist" stimulus programme, which expires this month, under which the central bank sells short-term securities to buy longer-term ones with the aim of driving down long-term borrowing costs. It could also expand the programme by extending the average maturity of its portfolio.
The Fed is due to release a statement at 1630 GMT, following a two-day meeting of its Open Market Committee.
"Everyone is waiting for the FOMC," said Credit Suisse strategist Shinji Ebihara.
"They are expected to take some action, and not refrain from acting completely, but it remains to be seen if what they do will disappoint markets," he said.
The 10-year JGB yield added 1 basis point to 0.820 percent after edging down half a basis point to 0.805 percent in the morning session.
The 10-year JGB futures contract for September ended down 0.15 point at 143.74, pressured by a strong performance in equities markets.
LIFE INSURERS NET SELLERS IN MAY
Japanese life insurers last month were net sellers of JGBS overall to the tune of 176.5 billion yen, excluding short-term bills, monthly data from the Japan Securities Dealers' Association released on Wednesday showed.
That marked their first month of net selling since November 2008, and their selling of medium-term bonds was the largest to date, strategists said, though insurers were still net buyers in the superlong sector.
"This highlights that life insurers were not willing to chase yields lower, which is why we still see a relatively steep curve even when the bond market rallies," said Le Ngoc Nhan, a JGB strategist at Morgan Stanley.
The yield spread between 10-year and 30-year bonds was at 1.035 points, not far from 1.040 points in the previous session, which was its widest since November 2010.
The 5-year yield added half a basis point to 0.220 percent, while the 20-year yield rose 2 basis points to 1.660 percent and the 30-year yield was up 1.5 basis points at 1.855 percent.
Underpinning JGB market sentiment, Moody's Investors Service said on Wednesday that an agreement by the three largest political parties to raise the consumption tax is a positive factor for the country's sovereign debt rating, as it marks one of the first serious attempts in many years to tackle Japan's bulging deficit.
"Agreement on the tax deal had no big short-term impact on the JGB market, but it did remove a longer-term worry from many people's minds," said a fixed-income fund manager at a Japanese asset management firm.
Minutes of the Bank of Japan's May 22-23 meeting, released on Wednesday, showed that a few board members want the central bank to be ready to act if risks to Japan's economy materialise as a result of events in Europe.
Comments
Comments are closed.