* BOJ expands APP by Y10 trln, facing political pressure
* Life insurers said buying in superlong sector
By Lisa Twaronite
TOKYO, Dec 20 Japanese government bonds pared
gains on Thursday after the Bank of Japan took further easing
steps as expected, although benchmark yields stayed well off a
nearly 7-week high hit in the previous session.
The BOJ expanded its asset-buying and lending programme
(APP) by 10 trillion yen ($119 billion) to 101 trillion yen, a
widely anticipated move to ease monetary policy in response to
intense political pressure.
"Expectations for the BOJ's expansion of the APP were
divided, with some expecting it to happen either this month or
next, and many were more inclined to believe it would happen in
January, so it's not a surprise, but they did it this time, not
next time," said Maki Shimizu, senior strategist at Citigroup
Global Markets Japan.
"At least it gives a message to the market that the BOJ is
willing to do something more," she said.
The central bank faces intensifying pressure from Shinzo
Abe, the country's next leader, to boost efforts to beat
deflation. Abe said on Thursday that the BOJ is carrying out the
policy steps sought by his Liberal Democratic Party (LDP) one at
Yields on cash 10-year JGBs fell 1 basis
point to 0.770 percent, above the session low of 0.755 percent
but still shy of Wednesday's high of 0.780 percent, which was
their highest level since Nov. 2.
The 10-year JGB futures contract snapped a
five-session losing streak, adding 0.13 point to end at 144.01,
although below its morning close of 144.08. On Wednesday,
futures hit an intraday low of 143.70, their lowest since Sept.
Discussion at Thursday's BOJ meeting of cutting interest
paid on excess reserves parked at the central bank by financial
firms to zero from the current 0.1 percent was one factor
supporting prices of shorter maturities, Citigroup's Shimizu
Yields on 2-year notes were flat at 0.90
percent while those on 5-year debt gave up half a
basis point to 0.180 percent.
The recently battered superlong sector outperformed on
Thursday, with life insurers said to be buying, though flows
were said to be light. Long maturities suffered in recent weeks
amid concern that Abe's reflationary policies could lead to
inflation in the long term.
Yields on 20-year bonds fell 1 basis point to
1.735 percent, up from 1.720 earlier. On Wednesday, they rose as
high as 1.750 percent in the previous session, their highest
since early April.
Yields on 30-year bonds lost 2 basis points
to 1.970 percent, up from a low of 1.955 percent before the
"Life insurers are said to continue to be buying at these
levels, on the chance that the U.S. fiscal cliff talks drag on
longer and keep Treasury yields and those on JGBs from rising
much this year," said a fixed-income fund manager at a Japanese
asset management firm in Tokyo.
The budget stalemate in Washington will shift for the first
time to the floor of the U.S. House of Representatives on