JGBs slip a tad on election, 20-yr yield hits 8-month high

TOKYO Sun Dec 16, 2012 9:29pm EST

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TOKYO Dec 17 (Reuters) - Long-dated Japanese government bond prices fell and the yield curve faced pressures to steepen on Monday after the Liberal Democratic Party (LDP), which favours aggressive monetary easing and more spending, won an election by landslide.

* The LDP's policy platform is seen as negative for longest maturities because it could, if successful, boost economic growth, or if unsuccessful, it could just lift inflation without boosting growth.

* Either way, long-dated bonds are likely to suffer while shorter maturities are likely to benefit from bolder monetary easing, which is likely to involve more buying of short-term debts.

* "It is easy to predict a steepening in the yield curve. Investors know that five-year bonds are unlikely to be sold off," said Tohru Yamamoto, chief strategist at Daiwa Securities.

* The 20-year JGB yield rose 2.0 basis point to 1.715 percent, its highest level since late April.

* The 10-year yield rose just a 0.5 basis point to 0.735 percent, highest in about three weeks and off a nine-year low of 0.685 percent hit earlier this month.

* The spread between the 10 and 20-year yields rose to 98 basis points, near a 13-year high of 99 hit earlier this month.

* The 10-year JGB futures price fell 0.04 point to 144.26 .

* The LDP had won 294 seats in the 480-member lower house, while its ally the New Komeito party took 31 seats, giving them a two-thirds majority needed to overrule parliament's upper house in legislation.

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