JGB futures steady, focus on Tokyo share prices
TOKYO, Feb 18 (Reuters) - Japanese government bond futures were steady on Monday as early gains in Tokyo shares offset the positive impact from a rise in U.S. Treasuries late last week. Market expectations that the Bank of Japan was unlikely to raise interest rates soon have supported JGBs in recent weeks. But investors have also been reluctant to chase JGB prices higher as yields still remain close to two-year lows hit in January.
"During the day, JGBs are likely to take cues from moves in share prices," said Mari Iwashita, senior strategist at Daiwa Securities SMBC's fixed income research department, adding that an early rise in the Nikkei was weighing on JGBs.
March 10-year JGB futures rose 0.02 point to 137.49 2JGBv1 as of 0058 GMT, having pared gains after rising to as high as 137.62 earlier.
The benchmark 10-year JGB yield slipped 1 basis point to 1.440 percent JP10YTN=JBTC.
In the stock market, the Nikkei share average rose 1 percent .N225.
U.S. Treasuries rose on Friday as a series of bleak reports suggested the U.S. economy may have tipped toward recession, boosting the allure of safe-haven government bonds.
A gauge of February factory activity in New York state posted its biggest drop on record to nearly a five-year low, while the Reuters/University of Michigan Surveys of Consumers index of consumer sentiment recorded its weakest reading since 1992.
Japanese indicators released on Monday showed signs of weakness in the domestic economy.
Japan's tertiary sector index of service industry activity fell 0.6 percent in December from the previous month. That was worse than the consensus market forecast for a 0.2 percent fall. [JPTERT=ECI]
Separately, a Reuters survey showed that sentiment among Japanese manufacturers worsened to a three-year low in February, hurt by rising raw material costs and lacklustre personal consumption. [ID:nTKF002991]
The BOJ expressed more caution over a slowing global economy on Friday and dismissed the possibility of inflation rising rapidly at home, reinforcing the view that it will sit tight or even cut interest rates later this year.
The BOJ kept interest rates unchanged at 0.50 percent on Friday after a two-day policy meeting, as expected.
Swap contracts on the overnight call rate show that investors see a roughly 30 percent chance of the BOJ lowering interest rates by the end of the year. JPONIBOJ=TRDT (Reporting by Masayuki Kitano; Editing by Chris Gallagher)
