JGBs slip, taking cue from weaker yen and stronger stocks
* Yield curve steepens as investors take profits in superlongs * 10-yr futures end down, one tick above session low * PIMCO: 'greatest comfort' in JGBs with maturities under 10 years By Lisa Twaronite TOKYO, April 22 (Reuters) - Japanese government bonds slipped on Monday, taking their cue from a weaker yen and stronger equities markets, with the superlong sector underperforming as investors took profits on Friday's gains. The yield curve steepened as investors unwound last week's gains made after the Bank of Japan's operational tweaks and satisfactory 5-year and 20-year sales brought calm to a market roiled by the central bank's massive stimulus unveiled on April 4. "I think Friday's move was a little bit too much, and life insurance companies are probably looking to buy the 20-year at 1.5 percent, and we have a 30- and 40-year auctions next month, so probably a lot of people want to stay away from those," said Tadashi Matsukawa, head of fixed-income at Pinebridge Investments in Tokyo. With a 10-year auction next Wednesday, "you don't want to chase that sector, either," he added. The yield on benchmark 10-year bonds added 3 basis point to 0.610 percent. It moved further away from its record low of 0.315 percent struck on April 5, the day after the BOJ shocked markets with a pledge to double its bond holdings in two years to help it meet the goal of 2 percent inflation. Japan's central bank governor and finance minister reiterated on Monday that the Group of 20 countries accepted that Japan's monetary easing is not aimed at weakening the yen. That helped the yen start the new week near a four-year low versus the dollar, not far from the 100-yen level that it has not crossed since April 2009. The weaker yen in turn helped push the Nikkei share average close to a five-year high. The 10-year futures contract ended down 0.24 point at 144.34, a tick above its session low. The 20-year yield added 4.5 basis points to 1.475 percent, while the 30-year bond yield added 6 basis points in thin trade to 1.605 percent, still shy of a then-six-week high of 1.645 percent touched on Wednesday. Market participants awaited a BOJ meeting on Friday, at which it will update its forecasts. Investors will be watching whether BOJ Governor Haruhiko Kuroda's two-year time frame to attain its 2 percent inflation target becomes an official forecast. "If the BOJ's easing steps work, we will eventually have to start pricing in inflation at the longer end, but for now, ahead of Golden Week, big market moves aren't likely," said a fixed-income fund manager at a Japanese trust bank. (Golden Week is a series of public holidays from between April 29 to May 6.) A portfolio manager at PIMCO said the world's biggest bond investor's "greatest comfort" in its JGB exposure is with bonds with maturities under 10 years, particularly under seven years, which it sees as anchored by the BOJ buying programme. "And we think the longer-end is more vulnerable to potential success of the reflation policy," Ramin Toloui, co-head of PIMCO's global emerging markets portfolio management team, told Reuters. In addition to the BOJ, market participants also awaited investment plans for this fiscal year through March 2014 from several major Japanese life insurers. Domestic life insurers hold $3.4 trillion in assets, and the BOJ's aggressive stimulus is likely to lead them to shift some of their money into foreign bonds. But the head of Japan's life insurance industry group said on Friday that such a shift would likely be temporary, with JGB yields likely to move up in the medium term as a result of the BOJ's measures.
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