JGBs fall as stocks rise on hopes for Europe

TOKYO: Japanese government bonds fell on Monday as political developments in Italy and Greece over the weekend eased fears about euro zone debt crisis.

Italy's president appointed former European Commissioner Mario Monti on Sunday to head a new government, while in Greece Lucas Papademos, a former European Central Bank policymaker, has been sworn in as prime minister.

Both leaders have been charged with pushing through reforms and austerity plans to restore their countries' tattered credibility.

December 10-year JGB futures were down 0.12 point at 142.75, its lowest level in a week and off a two-month high of 143.01 marked on Thursday.

The Nikkei share average rose more than 1 percent on Monday.

In cash bonds, the 10-year JGB yield rose 1.5 basis points to 0.975 percent. It marked a one-year low of 0.960 percent on Thursday.

"There hasn't been a complete resolution to the situation in Europe, but the risk of Greece defaulting will be reduced significantly with assistance (from the EU)," said Hidenori Suezawa, chief strategist at SMBC Nikko Securities.

"The rise in the Nikkei has somewhat slowed compared with markets overseas, but stock price moves in the next few weeks will be key to gauging Christmas sales (in the US)."

Japan's gross domestic product grew 1.5 percent in July- September from the previous quarter following three quarters of contraction, matching the median estimates by economists. Market reaction was subdued.

Market participants expect no changes in policy at the Bank of Japan's two-day meeting starting on Tuesday as it decided in October to loosen policy by expanding asset purchases.

Copyright Reuters, 2011