JGBs bolstered by expectations of more BOJ easing steps

Mon Jan 14, 2013 10:12pm EST

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TOKYO, Jan 15 (Reuters) - Japanese government bonds rose on
Tuesday, with the benchmark yield falling to a 2 1/2-week low,
on expectations that the Bank of Japan will take more easing
steps as early as next week. 
      
    * The 10-year JGB yield fell 1.5 basis points
to 0.795 percent, after falling as low as 0.790 percent, its
lowest since Dec. 27. Last week, the yield touched a 4-1/2 month
high of 0.840 percent.
    
    * "The market has priced in additional easing by the BOJ
next week," said Naomi Muguruma, a senior fixed-income
strategist at Mitsubishi UFJ Morgan Stanley Securities.
    "Today, the cabinet will approve the supplementary budget,
so the issuance schedule should be decided," she said.
    "Some of the concerns about supply/demand deterioration have
been relieved, so now the focus is on the BOJ's monetary policy,
which encourages investors to buy JGBs on dips."
    
    * BOJ Governor Masaaki Shirakawa said on Tuesday the central
bank will continue with powerful monetary easing.
 
    
    * Sources close to the central bank said it will consider
expanding stimulus again and double its inflation target to 2
percent at its Jan. 21-22 meeting. The bank has been under
pressure from new Prime Minister Shinzo Abe for bolder action to
beat deflation.   
    
    * The benchmark 10-year JGB futures contract ended
morning trade up 0.21 point at 143.96.
        
    * The yield on the 30-year bond was flat at
2.015 percent, not far from its Friday session high of 2.025
percent, its highest since August 2011. Japanese financial
markets were closed on Monday for a public holiday. 
    The yield on the 20-year bond inched down
half a basis point to 1.785 percent, moving away from its Friday
intraday high of 1.805 percent, its highest since April 2012. 
    
    * A weekly gauge of sentiment in the Japanese government
bond market improved in the latest week, supported by
expectations of more BOJ easing steps, but remained solidly in
negative territory, the latest Reuters poll showed on Tuesday.
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