TOKYO: Japanese government bond prices gained on Wednesday after surprisingly weak Chinese trade figures knocked down Japanese share prices and boosted the yen, triggering knee-jerk buying in JGB futures.
The 10-year JGB futures gained 0.25 point to 142.63 as speculators bought back JGB futures while selling Japanese stock futures after data showed Chinese exports fell for the first time in 17 months. Weakness in China, Japan's biggest trading partner, would be bearish for shares in Japanese firms.
Moves in cash bonds were limited, however, as investors see little reason to expect the benchmark 10-year yield to break out of range of 0.8-0.9 percent seen over the past few as the global outlook has been clouded by fears of slowdown in China.
"Credit concerns in China could resurface. Investors are torn between worries about emerging markets and hopes on developed economies," said Takeo Okuhara, fund manager at Daiwa SB Investments.
While the unexpected fall in exports stemmed in part from Beijing's crackdown on the use of fake invoicing that had exaggerated exports earlier this year, it did raise fresh concerns about the extent of the slowdown in the Chinese economy.
The Nikkei share average fell 0.4 percent even as Chinese shares recovered from lows as the dismal data sparked talk of monetary easing by the People's Bank of China.
Most cash bond prices rose a tad, though their gains were limited as their main buyers, long-term real money investors, took to the sidelines.
The 10-year cash JGB yield fell just 1.0 basis point to 0.855 percent while the five-year bond yield dipped 0.5 basis point to 0.310 percent.
Longer maturities were softer as the market tries to absorb Tusday's government sales of 300 billion yen ($2.97 billion) bonds, a reoffering of existing 20- and 30-year bonds.
The 20-year yield rose 0.5 basis point to 1.740 percent, while the 30-year yield rose 0.5 basis point to 1.870 percent, boith holding within ranges seen in the past few weeks.
Some investors were surprised the Japanese bonds had not shown more reaction to surges in US bond yields since the Federal Reserve signalled it would reduce its bond buying last month.
Part of the reason for JGBs' stability, analysts say, is the BOJ's buying, which initially caused a huge shock in the JGB market but is helping to underpin the market.
But others are worried that there could be a delayed reaction to rise in US bond yields if concerns about Chinese economy ease and spur a rally in risk asset prices.
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