JGBs slip on profit-taking after probing highs

TOKYO Thu Aug 28, 2014 10:05pm EDT

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TOKYO Aug 29 (Reuters) - Japanese government bond prices slipped on Friday as participants sold into a recent rally to take profits, forcing debt yields away from recent troughs.

The benchmark 10-year yield, which hit a 16-month low of 0.485 percent the previous day along with a rally in other sovereign debt markets like German Bunds and U.S. Treasuries, rose 1.5 basis points to 0.500 percent.

September 10-year JGB futures shed 0.08 point to 146.21.

The JGB yield curve steepened a touch, with participants noting that monthly duration extensions into longer-dated JGBs by index-following investors were tamer than usual.

Still, JGB yields looked poised to probe fresh lows in the long term, with geopolitical risks stemming from the Ukraine conflict flaring up again and driving investor bids for safe havens such as government debt.

"There really are no factors out there that can prevent the 10-year yield from declining further," said Katsutoshi Inadome, a fixed income strategist at Mitsubishi UFJ Securities in Tokyo.

There is no comprehensive evidence so far, but it would not be surprising if foreign investors seek relatively higher yielding JGBs with short-term Bund yields in negative territory, he added.

The two-year Bund yield has gone below zero and the 10-year German debt yield has continued to hit fresh record lows under the ECB's easy policy. The central bank is expected to ease further to stave off deflation. (Reporting by Shinichi Saoshiro; Editing by Eric Meijer)

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