TOKYO Dec 18 Japanese government bond prices
sagged on Tuesday with the benchmark 10-year yield hitting a
one-month high on concerns about a possible rise in the
country's debt burden following political pledges of big-scale
stimulus to boost the economy.
* The market was also dented by optimism that U.S.
policymakers will reach a deal to avert a fiscal crunch after a
top Republican negotiator showed readiness to accept tax
increases for the wealthy -- a key stumbling block in the talk.
* The 10-year JGB yield rose 1.5 basis point to 0.750
percent, its highest level since Nov. 15, while
the 10-year JGB futures fell 0.18 in price to 144.05
* Shinzo Abe, due to become Japan's prime minister next
Monday after an election victory at the weekend, said he would
compile a big supplementary budget to shore up the economy,
fanning worries of more debt issues to finance the stimulus
* "He's talking about a large scale budget, so we have to
think of a two-digit number," said Mari Iwashita, chief market
economist, referring to the possibility the budget could top 10
* While part of such a budget can be funded by surplus in
the current budget, analysts say the government will have to
issue new debt if the stimulus is close to 10 trillion yen.
* The 20-year bond yield rose 2.0 basis points to 1.730
percent, an eight-month high, while the 30-year
yield also hit an eight-month high of 1.985 percent
* These "superlong" bonds have been underperforming sharply
on worries aggressive monetary easing Abe is calling for could
boost inflation, perhaps not in the near future but some time
during their 20-year lifespan.
* In addition, market players were bracing for an auction of
1.2 trillion yen ($14.3 billion) of 20-year government bonds on
Tuesday. The auction closes at noon and results will be
announced at 12:45 p.m. (0345 GMT).
* On the other hand, expectations of more monetary easing
helped mitigate losses on shorter maturities as further easing
is likely to involve more buying of short-term government debt.
* The five-year yield rose just 0.5 basis point to 0.180