JGBs extend gains, taking cues from Treasuries

Thu Jul 11, 2013 2:39am EDT

Related Topics

* 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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