JGBs tread water, supported by year-end buying expectations

TOKYO: Japanese government bonds were treading water on Thursday, supported by expectations of bargain-hunting ahead of the end of Japan's fiscal year next week.

Ten-year JGB futures were nearly flat, inching up 0.02 point to 141.57, while the yield on the latest 10-year JGB was flat at 1.020 percent, after falling to 1.005 percent in morning trading.

The benchmark rose to a three-month high of 1.060 percent last week, but buying from pension funds and insurers was said to have emerged.

"Anything is possible, of course, but it is difficult to imagine the 10-year yield dipping under one percent before the end of the fiscal year, with plenty of bargain hunters after last week's sell-off," said a fixed-income manager at a European asset management firm in Tokyo.

Bonds could get something of a lift in afternoon trading after the release of bearish Chinese manufacturing figures, which could enhance the appeal of safe-haven fixed income assets.

China's manufacturing sector activity shrank in March for a fifth successive month, the HSBC flash purchasing managers index showed, with the overall rate of contraction accelerating and new orders sinking to a four-month low.

Separate data showed Japan's exports fell in February at a slower pace than the previous month, unexpectedly bringing the trade balance to its first surplus in five months.

A Bank of Japan policymaker said the domestic economy will resume a moderate recovery in the first half of the new fiscal year but that the outlook remains highly uncertain due to Europe's debt woes and geopolitical risks over Iran.

"The biggest risk is in the future development of Europe's debt problems," BOJ board member Yoshihisa Morimoto said in a speech.

The 20-year yield edged down half a basis point to 1.765 percent, moving away from a three-and-a-half-month peak of 1.830 percent marked last week.

The curve steepened slightly as the 30-year tenor underperformed, its yield inching up half a basis point to 1.940 percent.

The 5-year yield shed half a point to 0.340 percent.