JGBs fall on yen, Fed exit talk; 10-yr yield at 3-mth highs

TOKYO Sun May 12, 2013 10:35pm EDT

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TOKYO May 13 (Reuters) - Japanese government bond prices tumbled on Monday, with the 10-year yield hitting a three-month high, as falls in the yen boosted Japanese share prices while talk that the U.S. Federal Reserve may consider cutting back its buying programme hurt U.S. bonds.

* Investors were also cautious ahead of a 30-year bond auction on Tuesday, though losses were curtailed by the Bank of Japan's 1.2 trillion yen ($11.8 billion) bond buying announced on Monday, a part of the central bank's 7.5 trillion yen monthly buying of JGBs.

* The 10-year cash bond yield rose 5.5 basis point to 0.750 percent after having posted its biggest rise in five years on Friday.

* The benchmark 10-year bond futures fell 0.53 point in price to 143.17. At one stage, they fell as low as 142.98, the lowest level for the benchmark contract in almost a year.

* JGBs eased as their safe-haven attraction is eroded by rise in Japanese shares to 5 1/2-year highs on falls in the yen.

* Ten-year U.S. bond yields also rose to seven-week high as recent strength in U.S. jobs data fanned speculation the Fed could pare its bond buying later this year.

* "Thanks to the BOJ's buying today, the market has stopped falling for now. It appears the BOJ wants to stop bond yields rising further from current levels around 0.75 percent," said Katsutoshi Inadome, strategist at Mitsubishi UFJ Morgan Stanley Securities.

* "Nonetheless, JGBs could fall further if U.S. Treasuries decline. Investors are starting to question the idea that JGB yields should fall because the BOJ is buying bonds," he added.

* Part of the market's weakness is stemming from caution ahead of Tuesday's 500 billion yen ($4.91 billion) 30-year bond

*The 30-year bond yield rose to a high of 1.760 percent , its highest in two-months, at one point. It last stood at 1.745 percent, up 3.5 basis point on the day.

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