TOKYO: Japan's 10-year government bond futures hit a 21-month high on Monday on concerns over spluttering global growth after US jobs data came in weaker than expected.
The 10-year JGB futures rose 5 ticks to 144.00 after trading as high as 144.09, their highest level since October 2010, while yield on 10-year cash bond was unchanged at 0.800 percent after touching 0.790 percent to match a nine-year low hit on June 4.
"The 80-basis point level has quite strong resistance. We have seen a lot of people taking profit around that level," said Shogo Fujita, chief Japan bond strategist at Bank of America Merrill Lynch.
"If you are a Japanese megabank, your typical cost of capital will be around 80 to 90 basis points. Going below 80 basis points really doesn't make any sense. You can say that we are finally at this point entering a bubble phase in JGBs right now where it doesn't make any fundamental sense to buy JGBs but we still do," he said.
The US Labor Department said on Friday that non-farm payrolls grew by just 80,000 jobs in June, the third straight month below 100,000.
Fujita said the 30-year bond had been underperforming and recommended investors to take positions in 20-/30-year flattening, effectively a bet on the spread between the two different maturities debt narrowing.
The 30-year yield was flat at 1.865 percent, while that on 20-year debt was steady at 1.625 percent.Japan's Ministry of Finance will auction 700 billion yen ($8.80 billion) worth of 30-year bonds on Tuesday.
Data showed on Monday that Japan's core machinery orders tumbled in May in a sign that lingering worries about Europe's debt crisis, a slowing Chinese economy, and weak economic data from the United States are hindering the country's recovery from last year's devastating earthquake.
Sentiment towards Japanese government bonds improved after three straight week of deterioration, a Thomson Reuters survey showed, in the wake of disappointing US employment data and the European Central Bank's interest rate cuts last week.
Comments
Comments are closed.