JGBs stay firm as Europe, US worries remain

TOKYO: Japanese government bond futures edged up on Wednesday, supported by safe-haven demand amid ongoing concerns on the euro zone debt crisis and fears of slowdown in the global economy, shrugging off a slip in US Treasuries.

Underscoring the bullish momentum that has driven the bond market for six months, December 10-year JGB futures inched up 0.05 point to 142.62 , above their 20-day moving average at 142.57, and the kijun sen on their Ichimoku chart at 142.50.

"People are hesitant to sell bonds because they think it will be hard to solve the fundamental problems of the euro zone ... Signs of a slowing outlook for the global economy are also a headwind for Japanese exporters," said a trader at a Japanese bank.

JGBs are also likely to be helped by a quiet supply schedule ahead of half-year book closing on Sept. 30, he added.

Cash bonds were also underpinned by the Bank of Japan's outright purchase of JGBs on Wednesday, market participants said.

Medium-dated JGBs performed better than other maturities as the five-year yield declined 1 basis point to 0.340 percent , while the 10-year bond yield inched down 0.5 basis point to 0.995 percent .

Superlongs, bonds with 20- and 30-year maturities, led yield declines the previous day, bolstered by a strong 20-year JGB auction. But their decline was moderate on Wednesday. Twenty- and 30-year yields edged down 0.5 basis points to 1.740 percent and 1.935 percent respectively.

Investors were waiting for signs of whether progress will be made during a conference call planned between French President Nicolas Sarkozy, German Chancellor Angela Merkel and Greek Prime Minister George Papandreou on Wednesday.

US Treasury prices fell on Tuesday as stock market gains damped demand for safe-haven US government debt. Benchmark 10-year yields rose to 1.99 percent from 1.95 percent on Monday .

Copyright Reuters, 2011