JGBs plunge as stocks soar on yen's fall below 101 to the dollar

TOKYO Thu May 9, 2013 10:58pm EDT

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TOKYO May 10 (Reuters) - Japanese government bonds plunged on Friday, pushing the benchmark yield to its highest level since before the Bank of Japan unveiled its massive stimulus last month, as accelerating yen weakness sent Japanese stocks soaring.

* The 10-year Japanese government bond yield surged 6.5 basis points to 0.655 percent, its highest since March 12 and finally pushing above its recent trading range of 0.55 to 0.65 percent to which it held since last late month.

* Yields had been capped by BOJ's massive monetary stimulus scheme unveiled on April 4, under which the central bank pledged to double its bond holdings in two years to help the government meet its 2 percent inflation target. The benchmark yield fell to a record low 0.315 percent in the wake of the BOJ move, before settling back into its range.

* "The dollar/yen breaking above the 100-yen threshold caused the selling in the JGB market, but it seems to me that buying and selling are mixed, and we see some buying on dips in the mid- to long-term sector," said Naomi Muguruma, a senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities.

* The yen fell to as low as 101.20 per dollar, down more than two percent from Thursday's high around 98.65 yen, and the lowest level in over four and a half years. That helped send the Nikkei stock average to a 5 1/2 year high.

* The Bank of Japan on Friday offered to buy 2 trillion yen worth of treasury discount bills in its asset-purchase operations, robustly topping the 1.5 trillion yen it bought on May 2 and the 1 trillion yen it bought on April 30.

The central bank was not expected to offer to buy longer maturities, as it conducted a purchasing operation on Thursday.

* The 10-year JGB futures contract ended morning trading sharply lower, down 0.80 point at a session low 143.92, just a day after trading volume had fallen to the lowest so far this year.

* The 20-year bond yield jumped 6.5 basis points to 1.570 percent, its highest since March 19.

The 30-year bond yield added 4.5 basis points to 1.705 percent after rising as high as 1.710 percent, which was also its highest since March 19.

* Adding to downbeat JGB market sentiment, Ministry of Finance data released on Friday showed Japanese investors turned net buyers of foreign bonds in the last two weeks, buying 309.9 billion yen in the week through May 4 after purchasing a net 204.4 billion yen in the prior week. (Two weeks of data were published on Friday because of the Golden Week holidays.)

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