Japanese government bond decrease on US economy outlook, but yields seen capped

04 Mar, 2011

JGBs took cues from a rise in U.S. Treasuries yields and shares worldwide, but players were reluctant to bet on further increases ahead of the U.S. jobs report for February due later in the day.

March 10-year futures  were down 0.19 point at 139.35, after falling as low as 139.19.

Futures dropped to their lowest in almost two weeks at one stage and broke below their 25-day moving average, which came in at 139.28 on Friday.

In cash bonds, the benchmark 10-year yield  was up 0.5 basis point at 1.295 percent, after hitting a two week peak of 1.315 percent and approaching a 10-month high of 1.350 percent struck last month.

The five-year yield rose 1.0 basis point to 0.540 percent.

The 30-year yield was up 1.0 basis point at 2.220 percent, as investors were reluctant to bid ahead of a 30-year bond auction next Tuesday.

But the 20-year yield was flat at 2.045 percent with the bonds faring better than other sectors as investors such as insurers and pension funds snapped up longer maturities after the yield curve steepened the previous day.

Some analysts said the yields of super-longs might go up with rises in yields abroad.

"The yen bond yield curve is likely to steepen as the yields of super-longs may rise further along with those abroad," said Koji Ochai, senior market economist at Mizuho Investors Securities.

"But rises in short and medium-dated yields should be limited as the Bank of Japan is unlikely to end its loose monetary policy anytime soon, even if other central banks raise rates."

The yields of U.S. Treasuries were stuck near two-week highs in Asia on Friday. They were seen rising more if data points to a further recovery in the U.S jobs market later in the day.

Strong figures from private payrolls processor ADP on Wednesday raised hopes that Friday's jobs report could be stronger than economists' forecasts.

The U.S. Labour Department will release the report. Economists

The Reuters survey forecast that 185,000 jobs were created in the month compared with 36,000 jobs created in January.

Japan's Nikkei average gained 1 percent, buoyed by Wall Street's gains on expectations for a big rise in U.S. payrolls and a weaker yen.


Copyright Reuters, 2011

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