* Benchmark 10-year futures, cash bonds erase earlier losses
* Superlong maturities outperform as life insurers buy
By Lisa Twaronite
TOKYO, Dec 21 Japanese government bonds erased
losses on Friday, with benchmark yields dropping from a 7-week
high in line with rallying U.S. Treasuries after Speaker of the
U.S. House of Representatives John Boehner said his tax bill
aimed at solving the U.S. "fiscal cliff" budget impasse lacked
the votes to pass.
The U.S. news prompted investors to seek safe-haven assets,
lifting benchmark U.S. 10-year Treasuries and pushing down their
The 10-year JGB futures contract ended morning
trade up 0.02 point at 144.03, after earlier dropping as low as
Yields on cash 10-year JGBs fell half a basis
point to 0.765 percent, after earlier rising as high as 0.780
percent. That matched Wednesday's high, which was their loftiest
level since Nov. 2.
"It's all the U.S. story now," said Shogo Fujita, chief
Japan bond strategist at Bank of America Merrill Lynch.
"The Japanese story is pretty much over, with the Japanese
elections and the BOJ. Everything is on the 'cliff' now," he
On Thursday, the BOJ expanded its asset-buying and lending
programme (APP) by 10 trillion yen ($119 billion) to 101
trillion yen, an expected easing move against a backdrop of
rising political pressure.
Shinzo Abe, the country's next leader after his Liberal
Democratic Party's landslide in Sunday's elections, has called
on the bank to boost efforts to take more aggressive steps to
The superlong sector outperformed as Japanese life insurers
bought in that zone, market participants said.
"Life insurance companies had to buy anyway, and they're
buying on top of the 'cliff' story. They were waiting for a
time to do it," Bank of America Merrill Lynch's Fujita said.
Yields on 20-year bonds fell 1 basis point to
1.720 percent, while those on 30-year bonds lost
2 basis points to 1.945 percent.
Japan's financial markets will be closed on Monday in
observance of the Emperor's birthday, and many markets around
the world close on Tuesday for Christmas.