* 20-yr JGB futures trading revived for first time since
* Increased super long JGB issuance behind revival
* First day of trading tepid but looks likely to attract
investors over time
By Shinichi Saoshiro
TOKYO, April 7 Super long 20-year Japanese
government bond futures made a quiet start to trading after a
12-year hiatus, suggesting it may take some time to win over
more investors and generate greater liquidity.
The futures were revived on hopes it would help investors
better cope with a steady increase in issuance and any potential
At the Osaka Exchange, volume for the June 20-year futures
contracts <0#JTB:> on the first day was a modest 119 lots, a
fraction of the roughly 20,000 lots seen for the benchmark June
Trading in 20-year JGB futures was suspended in 2002 due to
low participation but the Japan Exchange Group, Osaka Exchange's
holding company, announced last June that it was reintroducing
them to the market.
The decision reflected the more important market role super
long 20-year and 30-year JGBs have come to play.
Debt-reliant Japan plans to issue 14.4 trillion yen ($139
billion) of 20-year JGBs for the year through March 2015, up
from 3.2 trillion yen 12 years ago when trade in 20-year futures
Similarly, issuance amount of 30-years will increase to 8
trillion yen from 600 billion.
Some market players expect 20-year futures to become more
popular over time.
"Trading in 20-year futures was revived at a decent time.
This is because the 10-year futures have lost flexibility and as
more investors are trading 20- and 30-year bonds, which make
20-year futures a handy instrument," said Tadashi Matsukawa,
head of Japan fixed-income at Pinebridge Investments in Tokyo.
An increasing number of investors, such as large domestic
banks, have opted to buy super long JGBs as the benchmark
10-year bonds now offer relatively little in return, with yields
held low under the BOJ's massive monetary easing.
The 10-year JGB yielded 0.615 percent on
Monday. In contrast the 20-year and 30-years yielded 1.475
percent and 1.665 percent.
"The key to the revival of the 20-year futures is whether
investors will use it to hedge for super long auctions, for
example by selling the futures while buying new 20-years,"
Matsukawa at Pinebridge Investments said.
The Osaka Exchange was betting on demand for 20-year futures
well beyond the BOJ's quantitative easing.
"We see steady demand for interest rate futures trading as
Japan continues to issue significant amounts of debt and as the
BOJ eventually has to find an exit from its quantitative easing
policy," said Masahiro Yada, an officer at the Osaka Exchange.
Still, doubts persisted about the merits of reviving the
"Trading in 20-year futures may not pick up anytime soon. As
such it could be used as a tool for speculators, which in turn
could shake the cash market and end up having the opposite
intended effect," said Katsutoshi Inadome, a fixed-income
strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
($1 = 103.5750 Japanese Yen)
(Editing by Shri Navaratnam)