JGBs mostly up on BOJ expectations; superlong tenor slips

Thu Jan 24, 2013 10:22pm EST

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TOKYO, Jan 25 (Reuters) - Japanese government bonds mostly
firmed on Friday, while the superlong tenor sagged on growing
expectations that the Bank of Japan will have to take further
steps to beat deflation.
    
    * Japan's core consumer prices fell 0.2 percent in December
from a year earlier, data released on Friday showed, down for a
second straight month, and a far cry from the central bank's new
price goal. 
    
    * The BOJ on Tuesday doubled its inflation target to 2
percent and made an open-ended commitment to buying assets from
next year. 
    
    * "I think people expect more from the BOJ to meet its
target, so they think it is very safe to buy JGBs through the
middle of the curve," said a fixed-income fund manager at a
European asset management firm in Tokyo.

    * The benchmark 10-year JGB futures contract ended
morning trade up 0.04 point at 144.49, after matching a six-week
high of 144.57 hit on Tuesday. 
    
    * The 10-year JGB yield slipped half a basis
point to 0.725 percent, after falling as low as 0.720 percent,
its lowest since Dec. 14. 
    
    * But the superlong zone sagged amid concerns that further
easing will lead to inflation in the long run. The 20-year yield
 added 1.5 basis points to 1.770 percent, while
the 30-year bond yield added 2.5 basis points to
1.995 percent.
    
    * A weakening yen also weighed on the longer end. The dollar
rose as high as 90.695 yen on the EBS trading platform in
morning trade, its strongest level since June 2010.
    
    * Underpinning sentiment toward shorter maturities, the
minutes of the BOJ's December policy meeting released on Friday
showed that board member Koji Ishida proposed scrapping the 0.1
percent interest the central bank pays to financial
institutions' excess reserves parked with it.
    He also proposed cutting the interest rate for the bank's
fixed-rate market operation and other loan schemes to 0.03
percent from 0.1 percent,

    * The five-year yield was flat at 0.150
percent. It fell as low as 0.140 percent on Tuesday, its lowest
recorded level since Japan started issuing 5-year notes in 2000.
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