JGBs climb on Greek worries, 10-year yield hits 7-month low

TOKYO: Japanese government bonds climbed on Friday supported by uncertainty over Greece's debt problems, signs of slowdown in the global economy and rising US Treasuries, pushing the benchmark 10-year yield to a 7-month low.

US Treasury prices rose on Thursday as euro zone worries drove investors out of riskier assets, despite late-breaking news that Greece had reached a deal on a five-year austerity plan.

JGB yields hit multi-month lows as bids from investors emerged broadly. The benchmark 10-year yield was unchanged at 1.105 percent, after hitting 1.095 percent, its lowest since November 22.

"Unless the US 10-year yield decisively breaks below 2.9 percent, JGBs are likely to stay in their current range. But the recent rise in (overseas) short-term yields is alarming, and this is something we should be monitoring," said Yusuke Ikawa, rates strategist at RBS Securities.

European banks faced higher short-term borrowing costs as investors fretted about their exposure to Greece and other indebted euro zone countries.

Concerns over slower global economic growth continued to support JGBs. A jump in new US jobless claims intensified fears over a sustained slowdown in domestic growth, while weaker expansion in China's factory sector reinforced the notion of a broader global slowdown. Both developments bolstered demand for high-rated government debt and other less risky assets in overseas markets on Thursday.

September 10-year JGB futures were 0.13 point higher at 141.38, after marking a fresh 6-1/2 month high of 141.40 on Friday. Cash bonds in longer maturities outperformed 10-year debt. The 20-year yield fell to a six-month low of 1.875 percent, while the yield on the 30-year bond dropped 1.5 basis points to 2.000 percent.

Copyright Reuters, 2011