* Ten-year JGBs futures down 9 ticks this week
* JGB 20-yr yields up 1.5 bps this week, 30-yr yields up 3
* BOJ stands pat; market expects more easing late this month
By Dominic Lau
TOKYO, Oct 5 Japanese government bonds were
lower on Friday as stronger equities decreased the appeal of
fixed-income assets, while investors also squared their
positions ahead of key U.S. jobs data later in the day and a
three-day weekend in Japan.
The Bank of Japan kept monetary settings unchanged after
having loosened policy only last month, but left the door open
to further easing later this month by striking a pessimistic
note on the state of the world's third-largest economy.
"There is a possibility that the BOJ may move for further
easing at the meeting at this month's end. They are going to
publish their semi-annual economic forecast. Most market
participants expect the forecast of CPI (inflation) will be
revised down," said Tomohisa Fujiki, interest rate strategist at
BNP Paribas in Tokyo.
Inflation is already well below the BOJ's target of 1
percent a year.
With the end-October meeting far away, Fujiki said that the
U.S. nonfarm payrolls data due later on Friday was affecting the
Economists in a Reuters survey forecast 113,000 jobs were
created in the U.S. in September compared with 96,000 in August,
while the unemployment rate was seen at 8.2 percent, versus 8.1
percent in August.
The 10-year yield inched 1 basis point higher
to 0.775 percent, moving further away from an eight-week low of
0.755 percent hit on Tuesday and Wednesday, and was up the same
margin this week.
Ten-year JGB futures slipped 7 ticks to 144.10,
while Tokyo's Nikkei share average ended 0.4 percent
Yields on 20-year bonds added 1.5 basis
points to 1.660 percent, while those on 30-year debt
put on 2 basis points to 1.920 percent.
For the week, the 20-year yield was up 1.5 basis points and
the 30-year yield put on 3 basis points.
"It's quiet among domestic investors despite the start of
new fiscal half-year and a new quarter as well. Sometimes, a new
period starts with profit-taking, and if there's nothing to take
profits on, it starts with accumulating bond positions in this
kind of environment," said Maki Shimizu, senior strategist at
Citigroup Global Markets Japan.
However, such accumulation has begun slowly against the
current backdrop, Shimizu said.
"The views are quite divided among domestic investors and
dealers. It doesn't mean they can't take either direction, but
rather, some were expecting more of a rise in yields from autumn
onward, but then there was heightened concern about the global
slowdown," she said.
Sapping demand for safe-haven assets, signs of progress have
emerged in Europe's debt crisis. On Thursday, European Central
Bank President Mario Draghi said, after the ECB helped policy
steady, that the bank has a "fully effective backstop mechanism
in place" to buy the bonds of troubled euro zone states such as
Spain when they request aid.
But even as the euro zone worked toward alleviating the
burden of debt-burdened countries, investors also fretted about
the fallout on global growth, which has kept JGB yields from
"In the case of JGBs, there is the problem of a possible
slowdown in China affecting Japan's economic fundamentals," said
Arihiro Nagata, head of foreign bond trading at Sumitomo Mitsui