TOKYO Dec 19 Japanese government bond prices
dropped on Wednesday with benchmark yields rising to a nearly
7-week high, tracking U.S. Treasury yields which rose as signs
of progress in resolving the U.S. "fiscal cliff" budget crisis
sapped demand for safe-haven fixed income assets.
* Negotiations in Washington to avert tax hikes and spending
cuts appeared to be progressing as House of Representatives
Speaker John Boehner kept the support of his Republican
colleagues for compromises in talks with President Barack Obama.
* "JGBs have moved on domestic factors recently, but they've
also tracked the uptrend in yields on U.S. Treasuries,
particularly as Japanese equities have soared with the 'risk-on'
mood," said a fixed-income fund manager at a Japanese asset
* Japan's Nikkei stock average rose above the 10,000
mark for the first time since early April on Wednesday.
* Yields on 10-year JGBs added 1.5 basis
points to 0.770 percent after earlier rising to 0.775 percent,
their highest level since Nov. 2.
* The 10-year JGB futures contract ended morning
trade down 0.05 point at 143.94, after falling as low as 143.70,
its lowest since Sept. 20.
* The Bank of Japan on Wednesday began its regular two-day
policy meeting at which sources said it will take further easing
steps. It will also consider adopting a 2 percent inflation
target no later than in January in response to calls from next
Prime Minister Shinzo Abe for the central bank to make stronger
efforts to beat deflation.
Fourteen of 19 economists polled by Reuters last week said
they expected the BOJ to ease, most likely by increasing its 91
trillion yen ($1 trillion) asset buying and lending programme by
up to 10 trillion yen.
* Abe's Liberal Democratic Party swept to power in Sunday's
lower house election after he called for massive fiscal spending
to revive the economy and "unlimited" monetary easing to achieve
* "As JGB markets have now discounted the election results
to a good extent, we should be aware of any signs that the yield
uptrend may have reached an end at 10-year yields of around 0.75
percent-0.80 percent," said Chotaro Morita, chief fixed income
strategist at Barclays, in a note to clients.
* An auction on Tuesday of 1.2 trillion yen ($14.3 billion)
20-year government bonds met tepid demand, as investors shunned
the superlong sector on concerns that Abe's policies will lead
* Yields on 20-year bonds rose half a basis
point to 1.740 percent after earlier rising to 1.750 percent,
their highest since early April.
* On the data front, Japan's exports fell in November from a
year earlier to mark the sixth straight month of declines,
bolstering the case for further monetary stimulus this week.