JGB futures edge up, investors see BOJ standing pat
TOKYO, April 18 (Reuters) - Japanese government bond futures edged up on Friday, rebounding from a six-week low as investors focused afresh on the likelihood of the Bank of Japan holding interest rates steady.
JGBs had been in retreat as renewed stability in stock markets reduced expectations for a BOJ rate cut this year, with the implied chance of a quarter-point cut falling to around 12 percent from around 50 percent earlier this month JPONIBOJ=TRDT.
"The BOJ may not cut rates, but that does not mean it is going to raise rates," said a chief manager at bond trading section at a Japanese bank.
"JGBs have seen enough of a slide to correct their surge in March."
June 10-year futures 2JGBv1 rose 0.03 point to 138.92 and a recovery above 139.00 prompted some technical buying in thin trade to the day's high of 139.12. It had sunk to a six-week low of 138.72 the previous day.
The benchmark 10-year yield JP10YTN=JBTC was flat at 1.375 percent after matching a six-week high of 1.385 percent.
The five-year yield JP5YTN=JBTC fell a basis point to 0.895 percent, stepping back from a two-month high of 0.910 percent hit on Thursday.
Shorter-dated notes and euroyen futures had been hit hard this week as market players believed that new BOJ Governor Masaaki Shirakawa was set to maintain the central bank's hawkish stance emphasising the need to normalise monetary policy.
That view helped slash expectations for a BOJ rate cut and pushed the two-year yield, which responds closely to expectations regarding central bank rates, as high as a three-month peak the previous session.
Shirakawa told BOJ branch managers on Friday that the economy was slowing due to rising energy and raw materials costs but was expected to moderately pick up pace. [ID:nTKG003044]
The market gave a muted reaction to comments from Shirakawa as he reiterated his previous view about the economy.
The two-year yield was not traded in the morning after climbing as high as 0.645 percent JP2YTN=JBTC on Thursday, the highest since January.
The new lead euroyen futures extended their losing streak this month to hit a four-month low, but market players said their losses could wind up soon as foreign investors looked near done with their position adjustment.
December euroyen futures edged down 2 basis points to 99.180 JEYv1, and struck their lowest point since last December.
Twenty-year yield JP20YTN=JBTC rose 1.5 basis points to 2.155 percent as dealers sold the bonds to prepare for an auction for the maturity next week. (Editing by Hugh Lawson)
