JGBs slip, tracking Treasures after Fed announces bond buys

Wed Dec 12, 2012 10:07pm EST

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TOKYO, Dec 13 (Reuters) - Japanese government bonds fell on
Thursday in line with U.S. Treasuries prices in the previous
session, after the U.S. Federal Reserve announced a new bond
buying programme.     
    
    * The Fed said it will buy $45 billion in Treasuries each
month on top of the $40 billion per month of mortgage-backed
bonds it started buying in September. It will expand its
purchases to five-year notes from the current seven-, 10- and
30-year Treasuries. 
    It also took the unprecedented step of indicating interest
rates would remain near zero until unemployment falls to 6.5
percent. The November rate was 7.7 percent.
    
    * The Bank of Japan will meet on Dec. 19-20, and will most
likely increase its asset-buying and lending programme,
currently at 91 trillion yen ($1.1 trillion), by another 5-10
trillion yen, sources have said. 

    * "The Fed's move adds to pressure already on the BOJ to act
next week," said a fixed-income fund manager at a European asset
management firm in Tokyo.  
    "But Treasuries sold off because investors expect the Fed's
move to lift the economy, while further easing from the BOJ
might not have the same effect here," he added.
        
    * Surging Japanese equities also undermined demand for JGBs.
The Nikkei gained 1.6 percent to an eight-month high as
the yen skidded to an 8 1/2 month low of 83.44 yen against the
dollar.
        
    * The Ministry of Finance offer 2.5 trillion yen of 5-year
notes on Thursday with a coupon of 0.2 percent, matching that of
the previous seven sales. 
    The 5-year yield rose half a basis point to
0.165 percent.
    
    * Japan's general election on Sunday is also likely to set
the stage for more pressure on the BOJ to ease further. The
opposition Liberal Democratic Party is likely to secure a
majority, and its leader, Shinzo Abe, is likely to push the
central bank to take aggressive monetary steps. 
      
    
    * Yields on 10-year JGBs added 1 basis point
to 0.710 percent, moving away from last week's low of 0.685
percent, which was the lowest since June 2003.     
    
    * Ten-year JGB futures for March ended morning
trade down 0.10 point at 144.60 point.    
    
    * The superlong sector underperformed, with yields on
30-year JGBs and those on 20-year bonds
 both adding 2 basis points to 1.915 percent and
1.675 percent respectively. 
    The Ministry of Finance will sell 1.2 trillion yen of
20-year debt on Dec. 18.
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