Ten-year JGB yield plumbs near-decade low on BOJ stimulus hopes

TOKYO, March 28 Wed Mar 27, 2013 10:28pm EDT

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TOKYO, March 28 (Reuters) - Yields on benchmark 10-year Japanese government bonds plumbed a near-decade low for a sixth day in a row on Thursday, driven by market conviction that the central bank will deliver a bold monetary stimulus at its meeting next week.

The 10-year yield dipped 0.5 basis point to 0.510 percent, its lowest level since June 2003, when it vaulted a record trough of 0.430 percent on the back of the Bank of Japan's quantitative easing measures. It has fallen 28.5 basis points so far this quarter, on track for its biggest three-month fall since April-June 2010.

But Maki Shimizu, senior strategist at Citigroup in Tokyo, recommended investors close their long positions on the 10-year sector ahead of an auction of 2.4 trillion yen ($25.4 billion)worth of similar maturities on Tuesday and the BOJ policy meeting on April 3 and 4.

"We just closed our 10-year long strategy. Many people among domestic investors are probably thinking about closing their long positions now, ahead of the BOJ meeting," she said.

"We are wary of the factors that could support higher yield from next week onwards. We chose not to wait until the BOJ meeting."

Ten-year JGB futures marked a new record high of 145.98, before ending the morning session at 145.91, up 0.03 point.

Shimizu said investors were also likely to take profit near the start of the financial year in Japan, which begins on April 1.

"The question is when that will happen ... whether they will wait until the BOJ meeting. If that becomes the majority view (waiting until the BOJ meeting) into next week, then the 10-year yield can renew this 0.430 (percent) record low," she said. "The view is still spilt."

The 20-year yield fell 2 basis points to 1.415 percent, just a tad above its near-decade low of 1.410 percent touched on Tuesday.

The 30-year yield underperformed, creeping up 0.5 basis point to 1.585 percent. Still, the yield on the long-dated tenor has eased 39 basis points since the start of January.

The two-year yield inched up 0.5 basis point to 0.040 percent ahead of an auction of 2.9 trillion yen worth of similar maturities later on Thursday. The Ministry of Finance offered the short-dated bonds with a coupon of 0.10 percent.

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