TOKYO Nov 26 Japanese government bond prices
firmed on Monday, with longest maturities snatched up on
bargain-hunting after their underperformance in the past week
and ahead of likely month-end buying by pension funds.
* The 10-year JGB futures rose 0.05 point to 144.59
, snapping their four-day losing streak, despite a rise
in Japanese share prices on Monday.
* Long-dated JGBs had been under pressure since last week
when Japanese Prime Minister Yoshihiko Noda called an election
on Dec. 16, as the main opposition party leader Shinzo Abe,
likely Japan's next prime minister, urged the Bank of Japan to
adopt more aggressive easing.
* A series of Abe's proposals -- including setting a higher
inflation target and sub-zero interest rates -- have sparked a
sell-off in the yen, a rally in Japanese shares and a steepening
in the JGB yield curve.
* As the spread between 10- and 20-year yields rose to 95
basis points last week, highest level since 1999, some
bargain-hunting kicked in in the 20- and 30-year sector on
* The 30-year yield fell 1.5 basis point to 1.935 percent
and the 20-year yield also fell 1.5 basis point
to 1.670 percent.
* They were also helped by expectations of month-end
duration extensions by pension funds. They often buy long-dated
bonds to extend their portfolio's duration to match the index.
* In contrast, the benchmark 10-year bond yield was flat at
0.735 percent. Still, that is close to a
nine-year low of 0.720 percent hit in July and market players
say JGBs look firm considering that Japan's Nikkei share average
hit a 6 1/2-month high.
* "Many bond market players think the latest rise in
Japanese shares is a bit excessive. It's not like investors are
drastically shifting their portfolio in favour of stocks over
bonds," said Naomi Muguruma, senior bond strategist at
Mitsubishi UFJ Morgan Stanley Securities.