JGBs extend gains, taking cues from Treasuries
* JGBs shrug off BOJ upgrade to econ view; BOJ holds steady * 10-yr yield sticks to recent 0.8 pct to 0.9 pct range * 10-yr futures contract rises to highest since June 10 By Lisa Twaronite TOKYO, July 11 (Reuters) - Japanese government bond prices rose on Thursday, taking their cues from U.S. Treasuries after Federal Reserve Chairman Ben Bernanke affirmed accommodative monetary policy would be in place for a while. Japan's bond market shrugged off robust domestic data and a brighter economic outlook from the Bank of Japan, as U.S. government bond yields and the dollar skidded. The BOJ kept its monetary policy steady at the conclusion of its two-day meeting on Thursday and offered a more optimistic view of the economy thanks to the positive effects of a weak yen and the government's reflationary policies. On Wednesday, Bernanke said the Fed was somewhat optimistic on the outlook for the economy, but that inflation was low, fiscal policy was quite restrictive and highly accommodative monetary policy would be needed for the foreseeable future. Bernanke's comments helped push the yield on benchmark 10-year U.S. Treasuries to 2.571 percent in Asian trade, down from Wednesday's U.S. close at 2.674 percent and sharply off a 23-month peak of 2.755 percent touched on Monday. The dollar plunged as low as 98.20 yen from a Thursday session high of 99.92 yen. "It was surprising that we had such a big reaction in dollar/yen. Maybe some of the long dollar positions were taken off after Bernanke's comment," said Tadashi Matsukawa, head of Japan fixed income at PineBridge Investments. "The reaction was much bigger than expected, so that might be triggering some of the shortcovering on the back of JGBs," he said. The yield on the benchmark 10-year cash JGB gave up 3 basis points to 0.820 percent, still holding to the range of 0.8-0.9 percent in which it has mostly traded since late May. The five-year bond yield slipped 1.5 basis points to 0.29 percent, its lowest since June 13. The 10-year JGB futures contract ended up 0.49 point at 143.12, just two ticks shy of its session high of 143.14, its highest level since June 10. Trading volume of 26,710 contracts was the largest since June 25. The superlong tenor also gained, with yields on 20-year bonds and 30-year bonds both losing 2 basis points, to 1.715 percent and 1.845 percent respectively. The market shrugged off data released early Thursday that showed Japan's core machinery orders rose 10.5 percent in May from the previous month, beating economists' median estimate of a 1.3 percent gain. Separate data from the finance ministry showed that Japanese investors turned net buyers of foreign bonds last week, snapping up the largest amount since September 2012 and breaking a seven-session net selling streak.
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