JGBs retreat, 10-year yield scales 7-mth peak
TOKYO, May 7 (Reuters) - The 10-year Japanese government bond yield climbed to a seven-month high on Wednesday as dealers returned from holidays in Japan to trade on rises in U.S. long-term yields and a stock market rally.
Benchmark U.S. 10-year Treasury notes have fallen in the wake of data late last week that showed the U.S. economy lost a fewer-than-expected 20,000 jobs in April, easing worries that the U.S. economy might fall into a deep recession.
Moves in JGBs remained volatile with June 10-year futures falling by as much as half a point, as a rise in Tokyo share prices and caution ahead of a closely watched 10-year JGB auction on Thursday also helped drag JGBs lower.
"The U.S. 10-year Treasury yield rose to above 3.9 percent during the holidays in Japan and that is leading to some selling pressure," said Naomi Hasegawa, senior fixed income strategist for Mitsubishi UFJ Securities.
June 10-year JGB futures fell 0.26 point from their close on Friday to 135.49 2JGBv1 after trimming some of their earlier losses. Trading volume was light, at around 15,000 contracts.
The JGB market was closed on Monday and Tuesday for Japan's Golden Week holidays.
The 10-year JGB yield climbed by as much as 4 basis points to 1.680 percent JP10YTN=JBTC to hit the highest level in nearly seven months. The 10-year yield later slipped from such highs to stand at 1.655 percent, up 1.5 basis point on the day.
EYES ON AUCTION
The pullback in 10-year yields from earlier highs suggests there may be some interest among investors in buying on dips at levels near 1.7 percent, said Tatsuo Ichikawa, a fixed income strategist at ABN AMRO Securities.
One supportive factor for JGBs is that market players widely expect the Bank of Japan to hold interest rates steady for a while as the economy is weakening.
Many market players expect the BOJ to wait until next year to raise rates after confirming a recovery in the U.S. economy. [BOJ/INT]
Longer-dated U.S. Treasuries fell on Tuesday on concerns about upcoming issuance and as a surge in crude oil prices CLc1 to record highs above $122 per barrel reignited worries about inflation.
On Tuesday, the benchmark 10-year Treasury note's yield US10YT=RR traded near the top of the past three weeks' range of between 3.92 percent and 3.66 percent.
In the stock market, the Nikkei share average rose 0.9 percent .N225.
The Finance Ministry is due to offer 1.9 trillion yen ($18.15 billion) in 10-year JGBs in an auction on Thursday. Continued...
