* 10-yr futures rise ahead of Dec contract expiry on Tuesday
* Yields expected to move sideways this week-Reuters poll
By Lisa Twaronite
TOKYO, Dec 10 Japanese government bonds mostly
firmed on Monday, with benchmark 10-year yields moving back
towards a 9-1/2-year low hit last week on expectations for more
monetary stimulus from the Bank of Japan.
Underpinning bonds, revised government data released on
Monday showed Japan's economy contracted for a second straight
quarter in the July-September quarter, confirming a mild
JGBs will likely tread water this week ahead of a national
election on Dec. 16, with the majority of respondents to this
week's market poll expecting yields to move sideways.
"People are in wait-and-see mode, so we don't expect a lot
of movement at these levels," said Le Ngoc Nhan, a strategist at
Morgan Stanley MUFG Securities in Tokyo.
"Looking ahead, people expect inflation only in the very,
very far future. The general trend now is that people want to
take the steepening precisely because of more aggressive
monetary easing by the BOJ," he said.
JGB investors are also awaiting the outcome of the U.S.
Federal Reserve's two-day meeting ending on Wednesday. The Fed
is also expected to announce a new round of Treasury securities
purchases, and to eventually adopt numerical thresholds for
inflation and unemployment levels, according to the latest
JGBs gained last week after Japanese media polls showed the
opposition Liberal Democratic Party was on track to secure a
majority in the election. LDP leader Shinzo Abe, likely to be
the country's next leader, has called for more aggressive
stimulus from the Bank of Japan.
The central bank might even take further easing steps at its
final rate review for this year on Dec. 19-20. BOJ Deputy
Governor Kiyohiko Nishimura said last week the central bank
would debate whether further stimulus is needed to support the
"JGB yields are pricing in more easing, but not pricing in
the expectation that the easy policy will have much effect
anytime soon," said a fixed-income fund manager at a Japanese
asset management firm.
Yields on 10-year JGBs shed 1 basis point to
0.695 percent. On Thursday, they fell to 0.685 percent, their
lowest level since June 2003.
Yields on benchmark cash bonds ended 2011 at 0.980 percent.
Ten-year JGB futures added 0.11 point to end at
145.19, moving close to Thursday's intraday high of 145.26,
which was the highest level ever for 10-year futures. The lead
contract ended 2011 at 142.41.
The December contract will expire on Tuesday. The March
contract rose 0.07 point to 144.71. Volume was moderately
strong, with 22,941 December contracts trading, topped by 23,011
The superlong sector lagged slightly after gaining late last
week in the wake of a strong 30-year auction. The 20-year yield
added 1 basis point to 1.655 percent, while the
yield on 30-year JGBs was flat at 1.890 percent.