JGBs slip ahead of U.S. employment data
TOKYO, Feb 1 (Reuters) - Japanese government bonds eased on Friday, ahead of key U.S. jobs data which could give a clearer picture of the outlook for the world's largest economy, and as risk assets outperformed, boosted by investors betting on a further drop in the yen. Tokyo's Nikkei average advanced 0.5 percent to log its 12th straight week of gains, its longest such winning streak since 1959, as the yen hit a 32-month low against the dollar on mounting expectations that the central bank would step up policy easing. The 10-year yield added 1.5 basis points to 0.765 percent, and was up 4 basis points this week, while 10-year bond futures fell 24 ticks to 144.06, below their five-day average of 144.16 but above their 20-day moving average of 144.05. "The longer-term trend is for higher yields in Japan, a little bit higher, on the back of the U.S. and European markets starting to correct," said Shogo Fujita, chief Japanese bond strategist at Bank of America Merrill Lynch. "It has nothing to do with the Japanese fiscal situation, nothing to do with the Japanese equity market, in fact. It has more to do with the fact that the overseas markets have started to correct, on the upside, and I think the Japanese yield curve is going to be affected as well." Yields on the 20-year bond inched 0.5 basis point higher to 1.775 percent. But the 30-year debt outperformed, with their yields dipping 0.5 basis point to 1.980 percent. The U.S. nonfarm payrolls report, due at 1330 GMT, is forecast to show a rise of 160,000 jobs, with the unemployment rate expected to remain steady at 7.8 percent. A better-than-expected figure could raise expectations that the U.S. Federal Reserve will begin to curb its asset-buying stimulus within this year, which would sap demand for U.S. Treasuries and in turn likely pressure JGBs. "Looking overseas, if there is big move in yields in either direction on a upside or downside surprise, that could have some influence here, but except for that, there is no near-term directional factor," said a fixed-income fund manager at a European asset management firm in Tokyo. The rally in Japanese equities, spurred by the yen weakness, has trimmed their yields over benchmark 10-year JGBs. According to Thomson Reuters Datastream, the spread between the Topix index's dividend yield and the 10-year bonds fell to 1.22 percent on Wednesday, its narrowest since April 2012.
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