TOKYO: Japanese government bond futures hovered near a nine-month high on Monday, supported by safe-haven demand from investors amid increasing concerns over a slowdown in the global economy.
Short-dated yields faced downward pressure, with the two-year JGB yield declining 0.5 basis point to 0.130 percent , matching a nine-month low hit earlier this month. Three-month euro-yen futures edged up 1 basis point to 99.725 , approaching a post-quake high of 99.740, hit on March 14, supported by expectations of additional monetary easing by the Bank of Japan.
The BOJ is keeping its key overnight call rate at 0.10 percent now and has said there would be little economic benefit in cutting the rate further. But some market players think a cut to around 0.05 percent may be possible as a symbolic gesture especially if the yen rises above a record high against the dollar.
"Some players in short-term derivatives markets are starting to factor in a rate cut," said Takafumi Yamawaki, chief rates strategist at JPMorgan.
On the other hand, long-dated JGB prices were softer, weighed by selling from investors who were aiming to change durations in their portfolios, traders said. The 20-year yield was up 0.5 basis point at 1.790 percent .
The benchmark 10-year yield was flat at 0.985 percent, after dropping to 0.975 percent on Monday morning. The 10-year yield fell as far as 0.970 percent on Friday, its lowest in nine months, in a knee-jerk reaction to a sharp fall in 10-year US bond yields. Last week, it fell below two percent for the first time since the 2008 financial crisis, marking their lowest in at least 60 years.
A Reuters weekly survey on the JGB market showed on Monday that 40 percent of market players expect Japanese government bond yields to fall this week, but the median forecast for the 10-year JGB yield at the end of the week was 0.980 percent , just below its close on Friday of 0.985 percent . That reflected respondent caution on pushing the 10-year yield further below one percent, as they remember that a fall to 0.82 percent last year was quickly reversed.
But some market players expected the yield to test 0.8 percent, its lowest since 2003.September 10-year JGB futures were up 0.07 point at 142.84 having hit a nine-month high of 142.90 on Friday.
Copyright Reuters, 2011
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