JGBs mostly slip as stocks soar; BOJ expectations lift front end

Thu Jan 17, 2013 10:11pm EST

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TOKYO, Jan 18 (Reuters) - Japanese government bonds mostly
slipped on Friday as a weaker yen lifted the stock market, while
expectations of easing steps by the Bank of Japan next week
lifted shorter maturities.
    
    * At its two-day meeting ending on Tuesday, the BOJ will
consider scrapping its 0.1 percent floor on short-term interest
rates and pledging to buy assets open-endedly until 2 percent
inflation is foreseen, sources familiar with the central bank's
thinking said. 
     
    * The 10-year JGB yield added 1.5 basis point
to 0.745 percent, moving away from Thursday's intraday low of
0.730 percent, its lowest since Dec. 17.     
    
    * The 10-year JGB futures contract ended morning
trade down 0.09 point at 144.29, on track to snap a five-session
rising streak and pulling away from Thursday's intraday high of
144.50, which was its highest since Dec. 13.   
    
    *  Japan's Nikkei share average rose more than 2
percent on Friday as exporters gained on expectations that the
central bank will ease monetary policy aggressively next week,
putting more downward pressure on the yen. 
    
    * "The rally in shares is taking demand away from JGBs
overall, but expectations of more BOJ easing is limiting losses,
and is pushing up short- and medium term notes," said a
fixed-income fund manager at a Japanese asset management firm in
Tokyo.
        
    * The yield on the 2-year JGB, which is often
inactive in cash trading, slipped half a basis point to 0.070
percent, its lowest since July 2005.
    
    * The 5-year JGB yield also shed half a basis
point to 0.150 percent, within sight of its record low of 0.145
percent hit during Japan's banking crisis in June 2003. 
    
    * The superlong tenor dropped, with pension funds said to be
selling, though yields remained well off highs hit a week ago. 
    The yield on the 20-year bond added 2 basis
points to 1.755 percent, moving back towards Jan. 11's high of
1.805 percent, its highest since April 2012.
    The 30-year bond yield rose 2 basis points to
1.990 percent, moving back toward Jan. 11's high of 2.025
percent, its highest since August 2011.
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