* Yields rise for second day but recent ranges intact
* 30-yr yield hits more than 4-month high
By Lisa Twaronite
TOKYO, Sept 7 Japanese government bond prices
fell for a second day on Friday after the European Central Bank
unveiled a bond-purchase scheme to help rein in soaring yields
in some southern euro zone countries, sparking rallies in
equities and other risk assets.
Investors are now focusing on the U.S. nonfarm payroll
report due out later on Friday -- expected to be a key
determinant in whether the Federal Reserve embarks on further
stimulus steps, including a possible a third round of
quantitative easing, or QE3.
Strategists said yields in all major bond markets could face
upward pressure if the report surprises on the upside -- the
chances of which seem to have risen after data showed U.S.
companies added staff in August at the fastest clip in five
A gauge of employment in the service sector also improved
and another report showed new claims for jobless benefits fell
last week to the lowest level in a month.
"Together, these data points suggest the U.S. labor market
turnaround seen in July was sustained into August. If these
conditions are reflected in tonight's employment report, market
expectations for QE3 could see a pullback," wrote strategists at
Credit Suisse in a report on Friday.
The Fed next meets Sept. 12-13.
For Friday's nonfarm payrolls report, economists expect
modest hiring of 125,000 new jobs. The unemployment rate is seen
holding steady at 8.3 percent.
The 10-year JGB futures contract for September
ended down 0.16 point at 143.93 after falling as low as 143.85.
The contract's last trading day is Sept. 12.
In the cash bond market, the 10-year bond yield
rose 1.5 basis point to 0.815 percent, after
rising as high as 0.820 percent.
The yield has fallen since hitting a two-month high of 0.860
percent in mid-August but remains well off a nine-year low of
0.720 percent marked several times in late July.
The spread between the 10-year and 30-year yields stood at
1.090, matching levels hit in late August which were its widest
since October 2010, and up sharply from 0.980 as recently as
"Last year, I was recommending overweighting the long end,
but now I'm not. It is cheap, but in order to realize that
cheapness, you've got to have flattening," said Neale Vincent,
strategist at Nomura Securities.
The 10-year sector, which has become expensive, has roll-and
carry -- the capital and carry gains made over time if the yield
curve maintains its current shape -- of around 10 basis points
over six months.
"The 30-year sector has roll-and carry of 5 basis points, so
in order for it to be worthwhile to hold the 30s, you've got to
expect 5 basis points of flattening to make up for the lack of
roll-and-carry. That's why people have been diving into the 8-
to 10-year sector," he said.
"A lot of investors think that nothing is going to happen,
which is why they view the middle of the curve as attractive."
The 30-year bond yield rose half a point to
1.905 percent, its highest level since April 24. The 20-year
bond yield added 1 basis point to 1.660 percent.