* Ten-year futures climb to two-month high in light trade
* Five-year yield slips to six-week low
By Dominic Lau
TOKYO, July 22 Yields on benchmark 10-year
Japanese government bonds hit a two-month low on Monday, helped
by stocks paring early gains as investors took profits after
Prime Minister Shinzo Abe's ruling bloc scored a big election
win over the weekend as expected.
The market was also supported by the Bank of Japan's offer
to buy 650 billion yen ($6.47 billion) worth of JGBs with
residual maturities of five to 10 years and more than 10 years,
as part of its radical plan to pull the country out of
The victory gave Abe and his coalition partner control in
both the lower and upper houses, handing him a strong mandate to
continue his aggressive push to revive the world's third-largest
Yuya Yamashita, rates strategist at JPMorgan in Tokyo, said
some market participants might have worried that Tokyo's Nikkei
share average would rally hard and hurt JGBs, if the
Abe's Liberal Democratic Party secured a majority on its own.
"This outcome of the LDP and the New Komeito gaining the
majority was the main scenario. Some JGB market participants may
kind of feel relief."
The 10-year yield eased 1.5 basis points to
0.785 percent, its lowest level since May 14 and an reversing
early rise to 0.805 percent, while Tokyo's Nikkei average
ended up 0.5 percent after rising as high as 1.2 percent
in morning trade.
Barclays Securities said the focus would now shift to
whether the government would follow through with the scheduled
increase in consumption tax in April 2014 and carry out reforms
in the labour market and deliver corporate tax cuts.
Monday's fall in the 10-year yield broke a trading range of
0.80 and 0.90 percent that has been held since late May as calm
returned to the JGB markets after it hit a record low of 0.315
percent a day after the BOJ unveiled its massive easing scheme
in early April, and then climbed to a high of 1.0 percent on May
BOJ board member Takehiro Sato said the central bank is
prepared to inject more stimulus if the economy's recovery is
threatened, citing risks such as the slowdown in Chinese growth.
Ten-year JGB futures were up 0.20 point at 143.64,
hitting a two-month high and holding above their five-day moving
average of 143.36. Trading volume was relatively light with
17,107 contracts changing hands, down from Friday's 18,096 and
last week's daily average of 17,408.
The five-year yield dipped 1.5 basis points to
0.270 percent, hitting a six-week low.
Both the 20- and 30-year
yields dipped 1 basis point, to 1.705 and 1.825 percent,
The head of Japan's life insurance association said late on
Friday that Japanese life insurers were unlikely to be thinking
of increasing their foreign bond holdings by large amounts with
domestic debt yields offering reasonable returns.