Ten-year JGB yield falls to near 10-year low

TOKYO Tue Feb 26, 2013 10:01pm EST

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TOKYO Feb 27 (Reuters) - Benchmark 10-year Japanese government bond yield fell to a near 10-year low on Wednesday as investors' continued their flight-to-quality after an inconclusive Italian election raised concern that efforts to resolve the euro zone debt crisis could suffer.

* A pause in the yen's weakening after the Italian poll helped knock Japanese equities lower, with the Tokyo's Nikkei down 0.9 percent, while U.S. Federal Reserve Chairman Ben Bernanke's comments on bond-buying also eased concerns that the Fed might make an early withdrawal of support for the debt market, which prevented the Treasury yields from rising despite better economic data.

* "The market had expected him to comment on an exit strategy ... (but) Bernanke tried to correct such expectations," said Maki Shimizu, senior strategist at Citigroup Global Markets Japan.

* Shimizu said the stall in yen's weakening against the dollar and the euro would likely keep the equity market in check, supporting the JGB yields. "(Any rise in yield) is a major concern for domestic investors ahead of March bookclosing," she said.

* The 10-year yield slipped 1 basis point to 0.670 percent, hitting a fresh near 10-year low and appearing set to fall for a fifth straight session, while 10-year JGB futures rose 12 ticks to 144.96 to a two-month high.

* The 30-year yield eased 2 basis points to 1.850 percent, touching a six-month low, and the 20-year yield also dipped 2 basis points, to 1.660 percent, a two-month trough.

* The five-year yield was unchanged at a record low of 0.115 percent. The short-end of the yield curve has been supported by expectations of bolder monetary easing by the Bank of Japan once Prime Minister Shinzo Abe nominates a new governor.

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