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JGB futures fall as Nikkei climbs but losses limited
TOKYO, April 16 (Reuters) - Japanese government bond futures fell on Wednesday as Tokyo shares climbed and trimmed the safe-haven appeal of debt after better-than-expected quarterly results at U.S. firms provided some relief to investors worried about the slowing economy.
But losses in JGBs were limited as investors stayed largely on the sidelines due to caution about credit market conditions before earnings reports from major U.S. investment banks later in the day, analysts said.
"It's tough timing for creating bets on either" direction in the market, said Katsutoshi Inadome, a fixed-income strategist at Mitsubishi UFJ Securities.
"Depending on the earnings results, a view could be reinforced that the risk reduction movements in the market had peaked in March. Or, bad earnings results could lift JGB futures up again," Inadome said.
June 10-year futures were down 0.20 point at 139.43 2JGBv1.
They dropped to the day's low of 139.33, near a one-month low of 139.13 struck last week, as the Nikkei share average .N225 climbed 1.4 percent, boosted by high-tech exporters after Intel Corp (INTC.O) affirmed its profit-margin target for 2008.
JPMorgan Chase (JPM.N), the third-largest U.S. bank, and Wells Fargo (WFC.N), the No. 5 U.S. bank, are to report their earnings on Wednesday. [RESF/US]
The benchmark 10-year yield was flat at 1.345 percent JP10YTN=JBTC and stayed in a range near a one-month high of 1.380 percent first hit earlier this month.
"The current yield levels don't appeal to investors, either to buy or sell," said Dohke Eiji, chief JGB strategist at UBS Securities, in a note to clients.
Dohke said that yields are too high for investors who want to take profits and they are too low for investors considering buying on dips.
"Movements among investors at the start of the new business year lack momentum," he wrote.
Japanese institutional investors' activity has been tepid since the new fiscal year started this month, except in the cash bond market with superlong-dated bonds that offer relatively high yields, analysts said.
Some of the largest Japanese life insurers told Reuters in interviews that they aim to increase holdings in longer-term bonds for the new year when yields spike up. [ID:nJPINS]
Tuesday's smooth auction of 30-year JGBs after two bad sales earlier in the month also helped to improve sentiment for that maturity.
The yield on the new 30-year bond auctioned the previous day fell 2 basis points to 2.390 percent JP30YTN=JBTC, as levels above 2.4 percent attracted solid demand from Japanese institutional investors, analysts said.
The 20-year yield was unchanged at 2.100 percent after slipping to 2.095 percent JP20YTN=JBTC.
The five-year yield rose a basis point to 0.850 percent JP5YTN=JBTC as some investors shifted money into longer-dated bonds, traders said.
The two-year yield was up a basis point at 0.610 percent JP2YTN=JBTC, the highest since late February.
September euroyen futures dipped a basis point to 99.220 JEYv1 and struck a four-month low of 99.205 partly due to renewed money market tightness while foreign investors continued to cut their positions, traders said. (Editing by Chris Gallagher)
