JGB futures slip after Buffett's bond insurer offer
TOKYO, Feb 13 (Reuters) - Japanese government bond futures edged lower on Wednesday after U.S. billionaire investor Warren Buffett offered to take over some liabilities of bond insurers, easing worries of a further deterioration in credit markets.
Selling of JGB futures by bond dealers looking to hedge their market exposure ahead of a five-year JGB auction this session may also be weighing on the market, analysts said.
"While Buffett's offer is not something that has any direct impact on Japanese markets, the way equities and U.S. Treasuries reacted is unfavourable for JGBs," said Chotaro Morita, chief fixed income strategist for Barclays Capital in Tokyo.
JGB traders continue to focus on just how deep the slowdown in the U.S. economy might be, and how the turmoil in credit markets will play out, Morita said.
March 10-year JGB futures fell 0.23 point to 137.90 2JGBv1. The 10-year JGB yield rose 2.5 basis points to 1.420 percent JP10YTN=JBTC.
The five-year JGB yield rose 2 basis points to 0.890 percent JP5YTN=JBTC.
Losses in JGBs were limited by lingering speculation that the Bank of Japan may cut interest rates later this year if the U.S. economy slips into recession and hurts Japan's growth.
Swap contracts on the overnight call rate show a roughly 40 percent chance of the BOJ cutting interest rates from the current 0.50 percent by the end of the year. JPONIBOJ=TRDT
FIVE-YEAR AUCTION
Warren Buffett said on Tuesday that he had offered to reinsure $800 billion of municipal debt guaranteed by bond insurers. [nN12216014]
Buffett told CNBC television that he had extended the offer to MBIA, Ambac and FGIC Corp, but added that one of the three had rebuffed him. The offer does not extend to riskier repackaged debt known as collateralized debt obligations.
His remarks eased fears that credit downgrades at the insurers could force selling of billions of dollars of municipal debt, and curbed the risk aversion bid that has stoked a U.S. government bond market rally for much of the past seven months.
Buffett's offer gave a lift to equities markets, with Tokyo's benchmark Nikkei share average rising 1.4 percent .N225, tracking gains on Wall Street.
The Finance Ministry offered 2.0 trillion yen ($18.6 billion) in five-year JGBs on Wednesday.
The coupon rate was left unchanged from the previous month's auction at 0.9 percent and the new issue was offered as a reopening of the No. 69 five-year JGB. Continued...
