JGBs gain on BOJ easing expectations, strong 10-year sale

Tue Jan 8, 2013 9:59pm EST

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TOKYO, Jan 9 (Reuters) - Japanese government bonds firmed on
Wednesday, with benchmark yields shrinking away from a
4-1/2-month high hit earlier this week on expectations of more
easing from the Bank of Japan.
        
    * The 10-year JGB yield slipped half a basis
point to 0.815 percent, moving away from Monday's high of 0.840
percent.
    
    * The BOJ will consider easing monetary policy again at its
Jan. 21-22 meeting as it eyes doubling its inflation target. Any
easing will likely take the form of another increase in its 101
trillion yen ($1.2 trillion) asset buying and lending programme,
mostly for purchases of government bonds and treasury discount
bills, according to sources familiar with BOJ thinking.
 
    
    * Robust demand at the previous session's 10-year sale also
underpinned sentiment, market participants said. 
       
    * "For sure, I think sentiment is turning positive right
now," said Le Ngoc Nhan, a strategist at Morgan Stanley MUFG
Securities in Tokyo.
    "But I wouldn't bet on a rally back to 70 basis points,
where we were before this sell-off started. I don't think we'll
go back to that level again," he said.
    Benchmark yields dropped as low as 0.685 percent on Dec. 6,
their lowest level since June 2003. Nhan said he still forecasts
the 10-year yield to gradually rise to 0.95 percent by the end
of March.
        
    * The benchmark 10-year JGB futures contract ended
morning trade up 0.07 point at 143.50 after earlier rising as
high as 143.67.
                
    * Longer maturities, recently under pressure amid concerns
about the new Japanese government's aggressive reflationary
stance, also firmed on Wednesday.
    Yields on 20-year bonds gave up 1 basis point
to 1.785 percent, while those on 30-year bonds 
fell 1.5 basis points to 1.995 percent.
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