Benchmark JGBs firm as investors await BOJ meeting outcome

TOKYO, April 4 Wed Apr 3, 2013 10:27pm EDT

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TOKYO, April 4 (Reuters) - Benchmark Japanese government bonds firmed in early trade on Thursday as investors awaited the outcome of Bank of Japan's two-day meeting, the first under new Governor Haruhiko Kuroda who has pledged to beat deflation through aggressive easing steps.

* The BOJ is likely to start open-ended asset purchases immediately, rather than in 2014, buy more government bonds and riskier assets such as exchange-traded funds, and could also extend the duration of bonds it buys in its easing program from the current three years, sources have told Reuters.

* Kuroda wants to go even further, and combine two separate bond-buying programs to facilitate purchases of longer-dated bonds.

* "We don't know the details of what the BOJ will do, so it is hard to make market moves this morning," said a fixed-income fund manager at a Japanese trust bank in Tokyo.

"Expectations are high that the BOJ will take more aggressive steps, but we need to see if the reality matches the expectations," he added.

* The 10-year yield slipped 1.5 basis points to 0.535 percent, inching back toward a near-decade low of 0.510 percent plumbed last week.

* Ten-year JGB futures rose 0.19 point to end morning trade at 145.63, pushing toward their record high of 145.98 hit last week.

* Longer maturities were steady, with the 20-year yield flat at 1.390 percent, not far above a near-decade low of 1.360 percent struck last week.

The 30-year yield was also flat at 1.520 percent, holding above its own near-decade nadir of 1.500 percent.

* The five-year yield was flat at 0.135 percent.

* Concerns about the U.S. economy also bolstered bond market sentiment, after data overnight showed weaker-than-expected private sector hiring last month and a services sector index fell short of forecasts.

* Rising tensions on the Korean peninsula further underpinned demand for safe-haven fixed income assets. North Korea has moved what appears to be a mid-range Musudan missile to its east coast, South Korea's Yonhap news agency said on Thursday.

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