JGBs 10-yr yield falls to 4-week low in line with stronger Treasuries

Fri Feb 22, 2013 2:01am EST

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TOKYO Feb 22 (Reuters) - Japan government bonds rose on Friday, with the benchmark yield dropping to a four-week low in line with firmer U.S. Treasury prices on fading fears the U.S. central bank will curb its asset buying soon.

Treasuries rose on Thursday following several U.S. data pointing to slow economic growth, such as weekly jobless claims and factory activity, which calmed bond investors' fears that the U.S. Federal Reserve would reduce to halt its asset purchases before the end of this year.

"The Bank of Japan will ease further, and the Fed will keep its easy policy for the time being, and this is supportive for bonds," said a fixed-income fund manager at a European asset management firm in Tokyo.

The yield on 10-year bonds shed 1 basis point to 0.725 percent after earlier falling to 0.720 percent, its lowest since Jan. 25.

Ten-year JGB futures ended up 0.07 point at 144.50, after rising as high as 144.60 in the morning session, their highest since Dec. 13.

Futures are now above both their 55-day moving average at 144.23 as well as their 100-day moving average, now at 144.26.

The superlong tenor rebounded on bargain-hunting after underperforming in the previous session following a lacklustre 20-year sale. Life insurers were said to be buyers, market participants said.

The 30-year yield fell half a basis point to 1.935 percent after dropping as low as 1.905 percent. The 20-year yield slipped 1.5 basis points to 1.730 percent after dropping to 1.720 percent earlier, its lowest since Dec. 21.

"Expectations of this yen depreciation path reversing, that's also helping strength in the superlong tenor, mainly driven to swaps, but this strength in cash bonds is probably supported by stable buyers," said Maki Shimizu, senior strategist at Citigroup Global Markets Japan.

The dollar failed to advance much against the yen as the Japanese currency's three-month-old declining trend on monetary easing expectations is showing signs of losing momentum. The dollar stood little changed at 93.29 yen, keeping some distance from its 33-month high of 94.47 hit last week.

The yield on the five-year JGB was flat at a record low of 0.130 percent hit earlier this week, on expectations that the Bank of Japan will eventually increase the time left to maturity - currently three years - of JGBs bought in its asset purchase programme.

Economics Minister Akira Amari kept the government's heat on the central bank on Friday, telling reporters after a regular cabinet meeting that "decisive steps" by the BOJ would help raise people's inflation expectations.

The BOJ doubled its inflation target to 2 percent in January and made an open-ended pledge to buy assets from next year in an attempt to pull the country out of deflation.

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