* 10-year JGB erases losses; yield steady in recent range
* 5-year yield creeps up before Tuesday's auction
* Bargain hunting pushes 30-year yield to 2-month low
TOKYO, Feb 18 Benchmark Japanese government
bonds were steady on Monday, erasing earlier losses after the
Bank of Japan resumed buying bonds under its asset purchase
programme, while bargain hunting in the superlong tenor sent the
30-year yield to a two-month low.
Expectations of more easing steps ahead by the central bank
underpinned bond market sentiment and helped benchmark JGBs shed
earlier losses made as some investors rebalanced into stocks,
which rose on renewed yen depreciation.
The BOJ on Monday bought about 300 billion yen ($3.2
billion) of JGBs with up to three years left until maturity in
its asset purchase programme.
"I think the BOJ's JGB buying operation, which had not been
held for a while, came and the result was reasonably stable,
which helped the market to recoup earlier losses," said Naomi
Muguruma, a senior strategist at Mitsubishi UFJ Morgan Stanley
"I think overall, the market lacks strong direction ahead of
two auctions scheduled this week, and also market participants
would love to see how long the yen weakening and the stock rally
trend will continue," she said.
The yield on 10-year bonds was flat at 0.745
percent after earlier rising as high as 0.755 percent. The
benchmark yield has doggedly stuck in its recent range between a
then-six week low of 0.720 percent hit on Jan. 25 and a then-two
week high of 0.805 percent touched on Feb. 4.
Ten-year JGB futures ended up 0.04 point at 144.27,
after falling as low as 144.09 in the morning session.
The 30-year yield was down 2 basis points at
1.915 percent, after earlier dropping as low as 1.910 percent,
its lowest level since Dec. 13. Life insurers were said to be
buying, although trading activity was thin.
The Nikkei stock average rose 2.1 percent, while
the dollar rose 0.5 percent to 93.94 yen, after the Group
of 20 nations did not cite Japan over policies that have
weakened the yen. Japan viewed this as tacit approval of its
"The G20 didn't single out Japan, so we're seeing a weaker
yen and stronger stocks," said a fixed-income fund manager at a
Japanese trust bank.
"But expectations of future easing steps by the Bank of
Japan continue to keep JGBs from selling off too much, and kept
the long yield in its recent ranges," he added.
The 20-year yield slipped half a basis point
to 1.735 percent, its lowest since Jan. 24, though gains in that
tenor were limited before an auction on Thursday.
The five-year yield added half a basis point
to 0.145 percent, moving away from its record low of 0.135
percent hit this month, ahead of a sale in that sector on
The Ministry of Finance will offer 2.7 trillion yen of
five-year notes, increasing the monthly issue amount by 200
billion yen both this month and next, to fund the government's
The five-year yield skidded to its record low as investors
bet the BOJ would scrap paying interest on banks' excess
reserves as part of future policy steps aimed at beating
Japanese Prime Minister Shinzo Abe told parliament on Monday
that buying foreign bonds could be among future policy options
for the central bank, and that the government must consider
revising the BOJ law guaranteeing the central bank's
independence if the BOJ cannot achieve its 2 percent inflation
Former top financial bureaucrat Toshiro Muto is the leading
candidate to become Japan's next central bank governor with Abe
to pick a nominee as early as this week, sources close to the
process told Reuters.
A weekly gauge of sentiment in the Japanese government bond
market was steady but remained in negative territory for a
seventh straight week, the latest Thomson Reuters poll showed on