* 10-yr March futures end down
* Losses limited by expectations of more BOJ easing steps
By Lisa Twaronite
TOKYO, Dec 11 Japanese government bonds erased
their early rise on Tuesday, with benchmark 10-year yields
moving back away from a 9-1/2-year low hit last week as
investors locked in gains.
Losses were limited by growing expectations of more monetary
easing steps from the Bank of Japan.
"It was simple profit-taking after the superlong end
outperformed toward the end of last week. On the futures
contract, yesterday the front-month trading shifted to March, so
there was probably some profit-taking in futures, too," said
Naomi Muguruma, senior strategist at Mitsubishi UFJ Morgan
"I think people would like to decrease some risk positions
before the election this weekend, and the 20-year JGB auction
next week," she said.
The opposition Liberal Democratic Party is likely to secure
a majority in Sunday's general election. LDP leader Shinzo Abe,
who will probably be Japan's next prime minister, has repeatedly
called on the BOJ to embark on more aggressive efforts to
stimulate the economy and beat deflation.
The BOJ will likely take further monetary stimulus action at
its meeting on Dec. 19-20, most likely by expanding its
asset-buying and lending programme, currently at 91 trillion yen
($1.1 trillion). It could expand by another 5-10 trillion yen,
according to sources familiar with the central bank's thinking.
The U.S. Federal Reserve is also expected to announce a new
round of Treasury securities purchases at the conclusion of its
two-day meeting that will begin later in the session.
"Further easing by the Fed is expected, but the BOJ will
probably act no matter what the Fed does. Ahead of the BOJ
meeting, Japan will hold an election, and the outcome will
likely boost expectations of more BOJ easing next year," said a
fixed-income fund manager at a Japanese asset management firm.
Yields on 10-year JGBs added half a basis
point to 0.700 percent after dropping as low as 0.6900 percent
earlier. Last week's yield of 0.685 percent was the lowest since
Yields on benchmark cash bonds ended 2011 at 0.980 percent.
Ten-year JGB futures for March ended down 0.06 at
144.65 point after finishing the morning up 0.06 point at
The 30-year sector outperformed in the morning, as brokers
who abstained from buying at last week's 30-year auction covered
short positions, market participants said.
Yields on 30-year JGBs initially fell 1.5
basis points to 1.880 percent, but they were later flat at 1.895
The 20-year yield added 1 basis point to