Wednesday, 28 November 2012 09:49
TOKYO: Japanese government bond prices ticked higher on Wednesday, with benchmark futures prices hitting a 9-1/2-year high, helped by lack of progress in negotiations to resolve the US "fiscal cliff" budget crisis and fall in Chinese shares.
The benchmark 10-year JGB futures price rose 0.16 point to 144.78, briefly rising to 144.79, their highest level since June 2003, when they had gone to as high as 145.09.
The current 10-year cash JGB yield fell 1.0 basis point to 0.720 percent, matching its nine-year low hit in July. That level has been a strong support for the yield in the past half year.
JGBs benefited from worries over the US "fiscal cliff" as US lawmakers remained deadlocked over how to ease the likely shock from $600 billion of fiscal tightening due to kick in early next year.
The fall in Shanghai shares to a near four-year low was also a talking point among some market players, who are still not convinced of a strong recovery in the Chinese economy.
"Although recent Chinese economic data is showing signs of improvement, Shanghai share prices seem to suggest that it is still far from a full-fledged recovery," said Takeo Okuhara, fund manager at Daiwa SB Investments.
"Given dimming hopes of a strong recovery in the US, China and Japan, bonds are likely to gain further. I expect the 10-year yield to dip below 0.7 percent by December," Okuhara added.
The 20-year bond yield fell 0.5 basis point to 1.660 percent. The spread over the 10-year yield stood at 94 basis points, near a 13-year high of 95 basis points hit last week on speculation of more aggressive easing by the Bank of Japan.
Such speculation was sparked after Prime Minister Yoshihiko Noda earlier this month called an election on Dec 16. as main opposition party leader Shinzo Abe, seen as a front-runner to become prime minister after the poll, is calling for radical easing and setting a higher inflation target.
Copyright Reuters, 2012