JGBs fall after Treasuries, data eyed for rate clue
By Rika Otsuka
TOKYO, Dec 27 (Reuters) - Japanese government bond futures fell on Thursday, hurt by an overnight slide in U.S. Treasuries, while investors awaited a string of data for clues on the Bank of Japan's future policy path.
U.S. Treasury yields rose to their highest levels since mid-November on Wednesday as a recovery in stocks and a poor debt auction sparked selling. Bond prices and yields move inversely.
But the drop in JGBs remained moderate as domestic share prices weakened, snapping a four-day winning streak. The Nikkei share average .N225 was down 0.5 percent by midday.
"JGBs slipped as market players took their cue from the previous day's fall in Treasuries," said Atsushi Ito, a JGB strategist at Morgan Stanley. "But trading activity is so light that a slide in this session may not mean much."
March 10-year JGB futures fell 0.17 point to 136.13 2JGBv1. Volume was light at 11,953 lots.
The 10-year yield edged up 1 basis point to 1.565 percent JP10YTN=JBTC after rising as high as 1.570 percent in early trade.
Trade was subdued as many market players have already left for year-end holidays, while a heavy schedule of data starting later on Thursday kept investors on the sidelines.
November readings for housing starts and construction orders are due at 2 p.m. (0500 GMT).
Investors will also pay close attention to Friday's data on consumer prices, employment and output, which could offer clues on the timing of the next BOJ rate rise.
The central bank has kept rates on hold since it raised them by a quarter percentage point to 0.5 percent in February.
Many in the market expect the BOJ to wait to raise rates until the third quarter of next year because of turmoil in global credit markets and signs of an economic slowdown in Japan.
JGBs have been supported over the past few months as doubts of a near-term BOJ rate tightening have grown among investors. The two-year yield was up 0.5 basis point at 0.740 percent JP2YTN=JBTC, while the five-year yield climbed 1.5 basis points to 1.070 percent JP5YTN=JBTC.
The 20-year yield rose 1.5 basis points to 2.160 percent JP20YTN=JBTC. (Editing by Michael Watson)
