JGBs slip as stocks take back some lost ground

Thu May 23, 2013 11:18pm EDT

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TOKYO, May 24 (Reuters) - Japanese government bond prices
fell on Friday as stocks clawed back some of their steep losses
in the previous session, though the benchmark yield remained
well shy of the one percent threshold touched a day before.
    
    * The yield on the 10-year cash bonds added
4.5 basis points to 0.875 percent after rising as high as 0.905
percent earlier. On Thursday, it rose as high as one percent for
the first time since April 2012.   
    
    * The 10-year JGB futures contract ended morning
trade down 0.58 point at 141.93 after falling as low as 141.64.
    
    * "The JGB market is back to normal today, or what passes
for normal lately," said a fixed-income consultant at a European
bank in Tokyo.
    
    * The Nikkei share average regained ground on Friday
after a 7.3-percent dive in the previous session, its biggest
one-day percentage drop in two years after weak Chinese factory
data spooked investors. 
    
    * Japanese Prime Minister Shinzo Abe said on Friday he hopes
the Bank of Japan communicates with markets more than ever and
takes appropriate action, such as through money market
operations, to stabilise the bond market. 
    
    * Japan's "Abenomics" economic policies are proceeding
smoothly and Bank of Japan Governor Haruhiko Kuroda was
communicating well with markets to soothe volatility, Economics
Minister Akira Amari told a news conference on Friday.
 
          
    * Superlong bonds also dropped, with the 30-year bond yield
 adding 3 basis points to 1.880 percent, while the
20-year bond yield also rose 3 basis points to
1.720 percent.      
    
    * The five-year bond also fell, with its yield 
adding 3 basis points to 0.380 percent. 
    Total returns on 5-year JGBs are around the same as bank
lending rates, which rates strategists at Barclays called "a
highly attractive level given the credit risk for the latter."
    Assuming that the kind of major loss-cut spiral that
occurred in 2003-2004 does not happen again, they told clients
in a note that they see limited upside for 5-year yields.
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