* BOJ expected to expand asset-purchase programme on Tues
* 10-year JGB futures dip but hold above 20-day moving
By Dominic Lau
TOKYO, Oct 29 Japanese government bonds fell on
Monday after the previous session's rise and ahead of Tuesday's
Bank of Japan meeting, with the market expecting the central
bank to further ease monetary policy.
The 10-year yield inched 1 basis point higher
to 0.770 p ercent, while the 10-year JGB futures eased
two ticks to 144.22 in light volume, but held above their 20-day
moving average at 144.16.
The five-year yield was unchanged at 0.185
percent, supported by strong expectations that the BOJ would
expand the size of its asset-buying programme by 10 trillion yen
($125.7 billion) on Tuesday.
The central bank now buys bonds with up to three years left
to maturity in its asset-purchase programme, hence supporting
Nevertheless, the BOJ expectations have been well flagged in
"The U.S. Treasury market rose sharply last Friday. Still,
the JGB market is still range-bound. Basically, market
participants are waiting for the BOJ decision tomorrow and the
nonfarm payrolls this Friday," said Tomohisa Fujiki, interest
rate strategist at BNP Paribas.
Finance Minister Koriki Jojima, piling pressure on the
central bank, said on Monday that he wants the BOJ to take bold
policy steps while closely working with government to beat
A weekly gauge of sentiment in the Japanese government bond
market turned lower but remained in positive territory for a
second straight week, with most respondents expecting benchmark
yields to stay in their recent range, a Thomson Reuters survey
Yields on the 30-year bonds rose 2 basis
points to 1.950 percent, giving up Friday's fall, while those on
the 20-year debt put on 1 basis point to 1.680
Primary dealers in Japanese government bonds warned the
finance ministry on Friday of the growing risk of a ratings
downgrade over a political standoff that could cause the
government to run out of money next month.
Japan is seven months into the current fiscal year, but
legislation needed to sell bonds to fund this fiscal year's
budget is stuck in limbo due to political bickering.
"Most of the market participants think the special deficit
bill will be passed by the Diet. The current issuance programme
will go on. This is still the central scenario in the market,
not affecting the market today," BNP Paribas's Fujiki said.
Tadashi Matsukawa, head of Japan fixed income at asset
manager PineBridge Investments, said market participants were
also cautious ahead of the U.S. presidential election on Nov. 6.
"If (President Barack) Obama wins, we are probably going to
see lower yield because the fiscal cliff is going to be an
issue," he said.
If Republican candidate Mitt Romney wins, "then we will have
risk-on rally in equities and commodities, and bonds will sell
off at least for a short period of time. It will be negative for
the JGBs," Matsukawa said. "The outcome of the presidential
election will be important for the JGB market."