TOKYO, March 25 Japanese government bond prices
mostly gained on Monday and the yield curve flattened as
expectations the Bank of Japan will step up buying in longer
maturities overwhelmed an increase in risk appetites following a
bailout deal for Cyprus.
Analysts also noted domestic pension funds were buying
so-called super-long bonds, such as 20- and 30-year bonds, for
portfolio rebalancing after a Japanese stock market rally in the
past few months lifted the value of their share portfolios.
"Progress in Cyprus was negative for JGBs. But strong buying
in superlong bonds supported the market," said Katsutoshi
Inadome, fixed income strategist at Mitsubishi UFJ Morgan
The yield on the 30-year bonds fell 3.0 basis points to
1.595 percent, its lowest level since August
2010, and edging towards a low of 1.535 percent reached then.
The 20-year yield fell 2.0 basis points to 1.465 percent
, coming close to a 10-year low of 1.450 percent
hit earlier this month.
The benchmark 10-year yield was flat at 0.560 percent
, as the strength in the super-long sector helped
to offset the initial losses triggered by the news on Cyprus.
The 10-year JGB futures price dipped 0.03 point to
145.70, still near their record high of 145.75 hit on
Cyprus clinched a last-ditch deal with international lenders
on Monday for a bailout that will shut down its second largest
bank and inflict heavy losses on uninsured depositors, boosting
the euro and share prices.
Expectations that new BOJ Governor Haruhiko Kuroda will
unveil aggressive bond buying at his first policy meeting on
April 3-4, or the next one in late April at the latest, have
underpinned JGBs in the past few weeks.
"It seems like Kuroda wants to buy about two trillion yen
more of assets per month," said a senior trader at a major
Japanese bank. "If so, there's nothing else to buy other than
bonds considering that the entire markets of REITs (real estate
investment trusts) and ETFs (exchange-traded funds) are about 4
to five trillion yen each."
In addition, many Japanese investors, such as pension funds,
have been buying bonds in recent weeks to rebalance their
portfolio by their financial year-end on March 31.
But some analysts also say such buying will likely disappear
after the new financial year begins, pointing to risk of a
setback in the market as yields for investors are painfully low,
especially at the shorter end of the curve.
The benchmark five-year bonds, which were untraded on
Monday, closed at yield of 0.120 percent on
Friday, near record low of 0.10 percent.
"There's no point buying five-year bonds. In the new
financial year, some investors will look to foreign bonds as an
alternative," said Tohru Yamamoto, chief fixed income strategist
at Daiwa Securities.
Foreign investors may be even less eager to buy JGBs.
BOJ data showed on Monday that foreign ownership of JGBs
fell during October-December, suggesting overseas investors may
be hesitant to further increase debt purchases as the yen