TOKYO Nov 9 Japanese government bonds rose on
Friday, pushing down benchmark yields to o ne basis p oint shy o f
a 9-year low, after fears about a looming U.S. fiscal deadlock
fueled a jump in U.S. Treasuries prices overnight.
* The U.S. economy faces the so-called "fiscal cliff" of
about $600 billion in expiring tax cuts and spending reductions
due to take effect in January, unless newly re-elected President
Obama can reach a deal with Congress.
* Concerns about the euro zone also underpinned demand for
fixed income assets, after European Central Bank president Mario
Draghi sounded downbeat on the euro zone economy on Thursday and
said he was ready to start new purchases of bonds. The ECB held
rates steady as expected.
* The 10-year yield slipped 1 basis point to
0.730 percent, its lowest level since Aug. 3 and not far above
its nine-year low of 0.720 percent touched several times in
* "I would say there's only a small chance that benchmark
JGB rates will move as low as 0.70 percent, but whether they can
rise from here depends to a large extent on the direction of
U.S. Treasuries," said Ayako Sera, a market economist at
Sumitomo Trust and Banking.
* Treasuries jumped on Thursday after a strong 30-year
auction against the backdrop of fiscal concerns, though both
10-year and 30-year yields remained within their recent ranges.
* Ten-year JGB futures ended morning trade up 0.06
point at 144.56 after rising as high as 144.61, their highest
level since July 25.
* The superlong sector continued to rise in the wake of
solid demand at Thursday's 40-year auction, with yields on
30-year bonds losing 1.5 basis points to 1.900
percent, their lowest since Oct. 3.
Yields on 20-year debt fell 2 basis points to
1.640 percent, their lowest since Sept. 27.
* The spread between 10-year and 20-year yields shrank to
0.91 percentage point from 0.93 point on Oct. 30 on a
last-traded basis, and some strategists say it could contract
further as the yield curve flattens.
The 10/20 spread can return to 0.85 point, so the current
level is attractive for establishing a flattener position,
strategists at Barclays advised clients in a research note on
* The yield curve steepened at the end of last month as
longer maturities underperformed due to concerns about possible
issuance disruption if a deficit-financing bill needed to fund
this fiscal year's budget failed to pass this month. But those
concerns dissipated as the government and opposition parties
appeared closer to an agreement on its passage.