JGBs skid in line with weaker yen, Treasuries

Sun Jan 27, 2013 9:52pm EST

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TOKYO, Jan 28 (Reuters) - Japanese government bonds started
the week with a weaker tone on Monday, with the benchmark yield
moving away from a six-week low as the yen eased and U.S.
Treasury yields rose.
            
    * The benchmark 10-year JGB futures contract ended
morning trade down 0.27 point at its session low of 144.28,
moving away from Friday's intraday high of 144.58, its highest
level since Dec. 13. 
    
    * "Treasuries came off on Friday, and this being felt in JGB
trading today. Even though stocks aren't surging today, the yen
is weaker, so it's hard to move in JGBs," said a fixed-income
fund manager at a Japanese trust bank in Tokyo.
    
    * Early on Monday, the dollar touched a fresh 2-1/2-year
high of 91.26 yen. The Nikkei share average 
turned negative but opened higher, hitting a 32-month high above
11,000. 
     U.S. Treasuries yields surged to their highest in three
weeks on Friday after data showed European banks are repaying
more emergency loans than expected. 
    
    * The 10-year JGB yield rose 2 basis points
to 0.740 percent. On Friday, it slumped to 0.720 percent, its
lowest since Dec. 14.     
    
    * "We advise long-only investors to wait for dip buying to
around 0.8 percent," said strategists at RBS Securities Japan,
in a note to clients on Monday.
    The yield curve is likely to reverse course from last week
with bear steepening up to the 10-year level and bear flattening
in the sectors over 10 years, they said. 
    
    * Japan's economy will likely grow 2.5 percent in the fiscal
year starting in April, the government said on Monday, as Prime
Minister Shinzo Abe's ambitious fiscal and monetary policies
boost domestic demand and a rebounding overseas economy helps
exports. 
    The government's projection for real gross domestic product
is roughly in line with the Bank of Japan's estimate issued last
week, but it is stronger than the median estimate for 1.8
percent growth in a Reuters poll. 
        
    * The recently battered superlong zone fared better than
other tenors. While longer maturities have underperformed due to
concerns that government's aggressive reflationary policies will
eventually lead to inflation, market participants say that
month-end buying could emerge this week. Some funds buy
longer-dated debt to extend the duration of their portfolios.
    
    * The 20-year yield added 1 basis point to
1.780 percent, while the 30-year bond yield was
flat at 1.995 percent, after earlier rising as high as 2.0
percent."
    "There seems to be some dip-buying whenever the 30-year
yield rises above 2.0 percent," the trust bank fund manager
said.  
   
    * The five-year yield added half a basis point
to 0.150 percent. 
    Last week, it fell as low as 0.140 percent, its lowest
recorded level since Japan started issuing 5-year notes in 2000,
in the wake of the Bank of Japan's decision to double its
inflation target to 2 percent and make an open-ended commitment
to buying assets from next year. 
    
    * A weekly gauge of sentiment in the Japanese government
bond market improved but remained solidly in negative territory
for a fourth straight period, the latest Reuters poll showed on
Monday.
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