JGB futures hit 10-month low, focus on BOJ stance
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 bump up interest rates later this year.
Along with U.S. and euro zone bonds, JGBs have been hammered in the past week due to surprisingly blunt inflation-fighting rhetoric from central bankers in Europe and the United States.
Such remarks have stoked market expectations that the Fed and the European Central Bank will raise interest rates in coming months, and have stoked jitters that the Bank of Japan might also boost rates later this year.
Market players are now waiting to see whether the BOJ, which dropped a bias towards raising rates in April, will follow its overseas counterparts in emphasising a need to rein in inflationary pressures.
In the spotlight will be BOJ Governor Masaaki Shirakawa's news conference on Friday, after a two-day policy meeting.
"Comments from the BOJ up to last month had put more emphasis on downside risks to the economy," said a portfolio manager for a major Japanese insurer.
"But there are growing doubts as to whether the BOJ will keep saying the same thing it said last month, given how much the situation in the United States and Europe has changed," he said.
The BOJ is widely expected to keep rates 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 2JGBM8.
September 10-year JGB futures fell as low as 132.96 2JGBU8, the lowest for a lead contract since late July. It later trimmed losses to stand at 133.16, down 0.06 point on the day.
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 jumped 4.7 percent in May from a year earlier, marking a 27-year high, was negative for JGBs, although traders were mainly taking cues from the previous day's falls in U.S. Treasuries, market players said. [JPCGPY=ECI]
Swap contracts on the overnight call rate show that investors now see a roughly 85 percent chance of the BOJ raising rates by 25 basis points to 0.75 percent by year-end, up from around 75 percent late on Tuesday JPONIBOJ=TRDT. Continued...
