TOKYO Feb 4 Japanese government bonds slipped
on Monday, with the 10-year yield hitting a three-week high,
after U.S. jobs and manufacturing surveys showed a recovery in
the world's largest economy remained on track.
U.S. employers added 157,000 jobs last month and 127,000
more jobs were created in November and December than previously
reported, while the pace of growth in the U.S. manufacturing
sector picked up in January to its highest level in nine months.
"That's the biggest driver on the JGB yields today," said
Yuya Yamashita, rates strategist at J.P. Morgan in Tokyo.
The 10-year yield rose 3 basis points to
0.800 percent, marking its biggest one-day move since Jan. 4.
Ten-year bond futures dropped 38 ticks to 143.68,
hitting a three-week low and breaking below their 20-day moving
average of 144.06. Monday's drop was their biggest one-day move
since Dec. 11.
Yamashita cited Tuesday's auction of 2.4 trillion yen ($25.9
billion) worth of 10-year bonds as another factor for the
sector's underperformance on Monday morning.
Yields on 20-year debt added 2 basis points
to 1.795 percent to a three-week high. The 30-year yield
also put on 1.5 basis points, to 2.00 percent.
Neale Vincent, strategist at Nomura Securities in Tokyo,
said near-term trading was likely to be volatile as the
short-end of yield curve was supported by the Bank of Japan's
asset purchases, while long-dated sectors were pricing in the
possibility of higher inflation under Prime Minister Shinzo
Abe's push for the central bank to adopt bolder policy action.
"It makes for a volatile and difficult trading environment.
The kind of trades that I am recommending are conservative, such
as payer butterflies on the 10-year areas," he said.
"We are anticipating that rates go up to between 1.0 percent
and 1.25 percent later this year."