TOKYO: Japanese government bond futures edged down on Tuesday as share prices recovered after panicky selling on news of the death of North Korean leader Kim Jong-il.
March 10-year JGB futures were 0.05 point lower at 142.31, after opening 0.06 point higher at 142.42 as players took cues from a rise in US Treasuries on Monday. Activity was subdued with only 6,926 contracts traded, below a quarter of the daily average over the past month.
"JGB futures opened higher as players took cues from rises in US Treasuries, but gains were limited as Tokyo shares rose unexpectedly. The market lacks decisive direction as yields are in the middle of their recent range amid thin trade," said a trader at a US brokerage.
Japan's Nikkei average rose 0.7 percent on Tuesday as short-term players bought back shares after selling the previous day, when news of Kim's death raised fears about regional instability.
In cash bonds, the 10-year yield edged up 0.5 basis point to 0.975 percent, having briefly fallen to 0.965 percent, matching a three-week low hit on Monday, and not far from a one-year trough of 0.940 percent marked in mid-November.
The 10-year yield has been steadily declining since it peaked at 1.090 percent at the start of this month, when a poor German bond auction raised worries that Japan could be next in line for a bond sell-off.
Many JGB market players expect investors to shun risk assets and keep their funds in bonds as there is no clear sign yet that investors will return to battered euro zone bonds.
But they are cautious about chasing yields lower as they are already very low and have limited room to fall. Players are mindful that a fall in the 10-year yield below 0.82 percent last year was quickly reversed.
Market reaction was subdued to the news that Japan is considering issuing more long-term bonds in the next fiscal year from April following an increase in short-term paper this year after a supplementary budget shortened the average maturities of its bond issues.
A finance ministry official also said on Monday that total bond issues for the next fiscal year could be around 175 trillion yen ($2.25 trillion) but that details are still being finalised. Bond market players will pay particular attention to the amount of debt that will be sold through regular auctions.
"The figure (for total expected bond issuance for the next fiscal year) is not a surprise and I think the market can digest additional issuance without a problem. There are only few auctions scheduled rest of this month and the market is entering year-end mode," said Katsutoshi Inadome, fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
Many market players expect the ministry to increase its monthly sale of 20-year bonds by 100 billion yen to 1.2 trillion yen in the next fiscal year. The 20-year yield was flat at 1.740 percent on Tuesday, in the middle of a 1.67-1.87 percent range from the past six months.
Comments
Comments are closed for this article.