Japanese government bond futures erased early losses on Friday as relief over Greece's debt deal turned to wariness about whether it can be implemented, while speculation about more easing ahead by the Federal Reserve and the Bank of Japan also lent support.
While Greece's leaders agreed on an austerity plan in order to secure further bailout funds to avoid a default, the country's lenders are seeking parliamentary seal of approval before providing any aid. Ten-year JGB futures ended up 0.07 point at 142.37, breaking through resistance at the top of the daily Ichimoku cloud at 142.33, also helped by a pullback in shares and firmer US Treasuries amid uncertainty over Greece.
Earlier, futures fell as low as 142.19 but support at the bottom of the cloud at 142.18 held. The yield on the 10-year cash bond was half a basis point lower at 0.980 pct. JGBs have been resilient compared to Treasuries so far this month and the spread between the benchmark 10-year JGB and the 10-year Treasury note has widened to just above 100 from 83 at the end of last month, suggesting strong demand from cash-rich domestic investors.
The US Federal Reserve last month pledged to maintain short-term interest rates at low levels and offer additional stimulus as needed. "The Japanese bond market has moved beyond short-term reaction to developments in Greece and is looking ahead to the possibility of the Fed launching QE3," said Ayako Sera, market economist at Sumitomo Trust and Banking.