* Ten-year futures hit intraday one-week high, eye stocks
* Fed minutes awaited for clues on U.S. stimulus steps
By Lisa Twaronite
TOKYO, Aug 21 Japanese government bonds rose on
Wednesday, with the benchmark yield touching a three-month low
at one point, as investors awaited the minutes of the U.S.
Federal Reserve's July policy meeting for clues to the timing of
U.S. stimulus reduction.
Weaker U.S. debt prices tend to weigh on JGB market
sentiment, although the two debt markets have not moved in
tandem recently due to diverging expectations of their
respective countries' monetary policies.
The Bank of Japan has pledged to maintain its easy policy to
hit its target of two percent inflation within two years, while
the Fed is expected to begin reducing its stimulus as early next
"The decline in risk premium, I think, is the main reason
behind the decline in (JGB) yield in the past month or so," said
Le Ngoc Nhan, a strategist at Morgan Stanley MUFG Securities in
"Volatility is declining, so that means people are more
comfortable going long," he said.
The yield on the benchmark 10-year JGB gave
up one basis point to 0.730 percent after earlier dropping as
low as 0.720 percent, its lowest since May 10. It was as high as
0.745 percent in the morning session.
Ten-year JGB futures ended up 0.13 point at 144.12,
after earlier rising from a session low of 143.97 to a one-week
high of 144.23. Volume of 17,936 contracts was relatively light,
dropping from the previous session.
The 30-day implied volatilities on JGB futures sank to 2.88 as of Tuesday, from 3.14 on Monday. The
latest data will be available later on Wednesday. Volatility is
down from a two-year peak of 6.1 hit on April 12, in the wake of
the BOJ's radical easing scheme unveiled on April 4.
BOJ Governor Haruhiko Kuroda said he would not hesitate to
provide further monetary stimulus if downside risks from a
planned sales tax hike or overseas economies increase, according
to an interview in the Mainichi newspaper on Wednesday.
Earlier in the session, the 10-year yield rose to its high
as a stronger yen and concerns about emerging markets helped
push stocks into negative territory. The Nikkei stock average
ended up 0.2 percent. The dollar also turned higher
against its Japanese counterpart, erasing earlier losses to buy
"JGBs were mostly flat, but got a little lift as stocks
suddenly turned lower, but moves are limited as everyone waits
for fresh trading factors," said a fixed-income fund manager at
a European asset management firm in Tokyo.
According to International Financing Review, a Thomson
Reuters publication, a few corporate pension funds, which have
been underweight JGBs, were forced to buy seven-year to 10-year
notes in thin trading, as Tokyo stocks remained fragile
In recent sessions, equity markets as well as emerging
markets currencies have been pressured by fears that the Fed's
looming stimulus reduction will draw more capital out of Asia.
The BOJ's regular operations also lent support to the JGB
market, with the central bank offering to buy outright up to 450
billion yen of JGBs with residual maturity of between five and
10 years, and an additional 200 billion yen of JGBs maturing in
more than 10 years.