JGBs steady ahead of U.S. jobs data; futures slip as stocks gain

Fri Nov 2, 2012 3:04am EDT

Related Topics

* 10-yr futures slip, end below 20-day moving average

* BOJ minutes hint at possibility of further easing steps

By Lisa Twaronite

TOKYO, Nov 2 (Reuters) - Japanese government bonds were mostly steady in cash trading on Friday as investors awaited U.S. employment data later in the session, while 10-year futures slipped as equities rallied.

The benchmark 10-year yield was flat at 0.775 percent, after earlier inching up to 0.780 percent, and not far from last Friday's close of 0.765 percent. On Thursday, it rose as high as 0.785 percent, its highest level since Oct. 23.

October U.S. payrolls numbers on Friday are expected to show a rise of 125,000, with the unemployment rate ticking up to 7.9 percent from the previous month's 7.8 percent, according to economists polled by Reuters.

Payrolls processor ADP reported on Thursday that U.S. companies added jobs in October at the fastest pace in eight months while new claims for jobless benefits fell last week.

Investors also awaited the outcome of next Tuesday's U.S. presidential vote, which could move U.S. Treasuries prices and have an impact on JGBs.

"It's very hard to trade this market right now," said Shogo Fujita, chief Japan bond strategist at Bank of America Merrill Lynch, adding that some hedge funds have to convert positions to cash ahead of year-end book closings at the end of this month.

"Going into December, I can't see anyone taking massive positions or bets."

Ten-year JGB futures ended down 0.08 point at 144.06, finishing the week far below a nearly 3-month high of 144.47 touched on Tuesday and also below their 20-day moving average, now at 144.15.

The Nikkei gained 1.2 percent, ending above the 9,000 mark for the first time in a week.

On the plus side for bonds, minutes of the Bank of Japan's Oct. 4-5 policy meeting released on Friday suggested the central bank will take further stimulus steps.

A few BOJ board members warned that a recession in the world's third-largest economy could not be ruled out given recent weakness in industrial production.

Yields on 20-year debt edged down half a basis point to 1.675 percent, matching last Friday's close. The 30-year bond was flat, its yield at 1.940 percent.

"I guess there is still demand for the superlong sector from Japanese life insurers, but they appear to be holding out for better yield levels," said a fixed-income fund manager at a Japanese asset management firm.

Longer maturities have faced pressure in recent weeks on concerns about possible issuance disruption if a deficit-financing bill needed to fund this fiscal year's budget fails to pass this month. But those concerns faded this week as the government appeared to move closer to its passage.

Japan's government is ready to compromise with the opposition to pass the bill, Vice Finance Minister Tsutomu Okubo told Reuters in an interview on Thursday.

Shinzo Abe, president of the main opposition party Liberal Democratic Party, said it is also ready to accept talks on the bill, Japanese media said.

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