Benchmark JGBs slump in line with Treasuries as FOMC awaited

Mon Jan 28, 2013 9:56pm EST

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TOKYO, Jan 29 (Reuters) - Benchmark Japanese government
bonds slumped, taking their cue from U.S. Treasuries which
dropped in the previous session as investors awaited this week's
U.S. Federal Reserve meeting for clues on how long easy policy
will continue.
    
    * The 10-year JGB yield rose 1.5 basis points
to 0.760 percent. Last week, the benchmark yield fell to a
six-week low of 0.720 percent.
    
    * "Profit-taking is continuing in 10-years, after it
strengthened too much at the end of last week, and particularly
after the 10-year Treasury yield went above 2 percent yesterday,
with investors waiting for the FOMC," said a fixed-income fund
manager at a Japanese asset management company.
    "But the Bank of Japan's easy policy continues to support
JGBs, particularly short- and medium-term maturities," he added.
    
     * On Wednesday, at the conclusion of its two-day meeting,
the Fed's policy statement might contain clues on whether its
latest bond purchase program could end as early as this year.
    By contrast, the Bank of Japan said last week it was
doubling its inflation target to 2 percent and making an
open-ended commitment to buying assets beginning next year.
 
    
    * The benchmark 10-year U.S. yield broke above 2
percent on Monday for the first time since last April.
 
 
    * The 10-year JGB futures contract ended morning
trade down 0.16 point at 144.14. On Friday, futures rose as high
as 144.58, their highest level since Dec. 13.    
    
    * Superlong maturities were steady on expectations of some
duration extension buying in the final trading days of January.
Funds often buy to extend the duration of their portfolios.
    The 20-year yield was flat at 1.770 percent,
while the 30-year bond yield slipped half a basis
point to 1.990 percent.
        
    * The five-year yield was also flat at 0.155
percent.
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