CORRECTED - CORRECTED-JGB futures hit 10-month low after Treasuries drop
(Corrects paragraph 10 to show a rise of 2 basis points, not 1 basis point)
TOKYO, June 11 (Reuters) - Japanese government bond futures hit a 10-month low on Wednesday after U.S. Treasuries slid the previous day on strengthening expectations for the Federal Reserve to raise interest rates later this year.
Growing market expectations that the Fed and the European Central Bank will increase rates in coming months have been seen as paving the way for a potential hike by the Bank of Japan, and have hammered JGBs.
Market players are now focusing on what the BOJ, which dropped a bias towards raising interest rates in April, will say on how it views the balance between downside risks to the economy and inflationary pressures.
"As far as Japan is concerned, the BOJ has not said anything official yet regarding its latest stance on monetary policy," said Chotaro Morita, chief fixed income strategist for Barclays Capital in Japan.
Investors are waiting to see what BOJ Governor Masaaki Shirakawa has to say at a news conference on Friday after a two-day policy meeting, Morita said.
The BOJ is widely expected to keep interest rates unchanged at 0.50 percent at this week's meeting. [ID:nT265731]
The September 10-year JGB futures contract became the new lead contract as its trading volume exceeded that of the June contract.
September 10-year JGB futures fell as low as 132.96 2JGBU8, the lowest for a lead JGB futures contract since late July. It later trimmed losses to stand at 133.20, down 0.02 point on the day.
The September contract's trading volume stood around 13,500 lots compared with roughly 3,300 lots for the June contract 2JGBM8.
The benchmark 10-year JGB yield briefly touched a 10-month high of 1.825 percent JP10YTN=JBTC, but later slipped off the peak to stand at 1.820 percent for a rise of 2 basis points.
The two-year yield rose 1 basis point to 0.955 percent JP2YTN=JBTC, after having climbed to a 10-month peak of 0.980 percent on Tuesday.
The lead three-month euroyen futures contract fell 4.5 basis points to 98.735 JEYv1, hovering near a 12-year low of 98.705 hit on Tuesday.
Data showing that Japanese wholesale prices rose by a faster-than-expected 4.7 percent in May from a year earlier had a limited impact on JGBs, which were taking cues from the previous day's fall in U.S. Treasuries, market players said. [JPCGPY=ECI]
Top Federal Reserve officials on Tuesday hammered home the U.S. central bank's determination not to allow inflation to get out of control, cementing views that interest rates will rise later this year. [ID:nN10365737] Continued...
