* Open interest on 10-yr futures soars to Aug 2010 levels
* BOJ duration extension expectations anchor 2-, 5-yr tenors
* Japanese investors turn net buyers of foreign bonds last
By Lisa Twaronite
TOKYO, April 19 Japanese government bond prices
were narrowly mixed on Thursday but remained wedged in recent
ranges by expectations of further easing steps by the Bank of
Japan next week.
BOJ Governor Masaaki Shirakawa said late on Wednesday in New
York that the central bank is "fully committed" to continuing
"powerful monetary easing" through various measures, such as
keeping interest rates practically at zero and purchasing
financial assets until 1 percent inflation is in sight.
The yield on the latest 10-year JGBs was flat
at 0.935 percent, not far from a 17-month low of 0.930 percent
hit on Monday. For the past two weeks, the 10-year yield has
been trading under the 1 percent mark, which is viewed as key
June 10-year JGB futures reversed morning losses
and finished up 0.05 point at 142.67.
Open interest on the benchmark JGB futures contract this
month has risen to its highest levels since August 2010, which
could suggest a buildup of long positions ahead of the BOJ
Sources have said that the BOJ might ease at its next
meeting on April 27 by expanding its 65 trillion yen
asset-buying and loan programme by 5 trillion or 10 trillion
yen, with the increase to be used for purchases of government
"The market is now expecting the BOJ to do something. It's
already priced in," said Le Ngoc Nhan, a JGB strategist at
The shorter end of the yield curve was anchored by the BOJ
expectations, with the 5-year yield creeping down
half a basis point to 0.285 percent, while the yield on the
2-year JGB also lost half a point to 0.105
The BOJ buys bonds with up to two years left to maturity, so
the five-year tenor has outperformed as many market participants
expect policymakers to extend the maturities, perhaps as early
as next week.
"The 5-year rate is below 30 basis points, so even if an
expansion is announced, I don't think it's going to drive rates
any lower than they are now," Nhan said.
The 20-year JGB also gained slightly, with its yield
easing half a basis point to 1.710 percent, while
the 30-year JGB slightly underperformed, its yield
adding 1 basis point to 1.900 percent.
Capital flows data from Japan's Ministry of Finance showed
on Thursday that Japanese investors were net buyers of foreign
bonds last week after large net selling in the first week of the
new fiscal year, while foreign investors also turned net buyers
of Japanese bonds last week.
"It's hard to draw conclusions about trading patterns before
Golden Week, because activity typically picks up after the
holidays," said a fixed-income fund manager at a Japanese asset
management firm, referring to the series of holidays that begin
on April 29.
The JGB market shrugged off separate data showing Japan's
exports rose in March from a year earlier for the first time in
six months, though the country's trade balance returned to a
deficit last month.