JGB futures inch up, investors sidelined by US debt worries

TOKYO: Japanese government bond futures inched up on Tuesday, with the market drawing support from buying on dips by banks and other cash-rich Japanese investors, but activity was subdued as concerns about a US deadlock over raising the debt ceiling left many market participants sidelined.

"Participants are still waiting to see how a US debt deal develops, and this is likely to remain a key issue for the next week or two," said RuiXue Xu, a strategist at RBS Securities.

In addition to developments in the US debt limit negotiations, players will be watching economic indicators to be released later this week, including Japanese industrial production and gross domestic production in the United States.

September 10-year JGB futures rose 0.02 point to 141.57, just above the five-day moving at 141.55, appears likely to become support after serving as a cap to the market since the latter half of last week.

"On top of overseas debt problems boosting safe-haven demand for JGBs, reconstruction-related bank lending has not picked up yet ... Japanese investors have no choice but to buy debt," said Jun Fukashiro, chief fund manager at Toyota Asset Management. "Investors are not chasing prices higher, but are waiting for dips," he added.

The benchmark 10-year JGB yield was unchanged at 1.085 percent after rising 0.5 basis point to 1.090 percent during the morning . The yield of the five-year bond was down 0.5 basis point at 0.375 percent

Both yields remained within striking distance of eight-month lows hit last week of 0.360 percent for the five-year bond and 1.060 percent for the 10-year bond.

Copyright Reuters, 2011