TOKYO, July 7 Japanese government bond prices
were little changed on Monday as the market struggled to find
immediate cues after U.S. financial markets were closed on
Friday for Independence Day.
The benchmark 10-year JGB yield inched up
half a basis point to 0.565 percent.
September 10-year JGB futures crawled 0.02 point
higher to 145.58.
Focus for the range-bound JGB market was on Tuesday's 400
billion yen ($3.92 billion) 10-year inflation-linked JGBs.
Participants expect the inflation-linked JGBs, known as
"linkers," to attract decent demand from investors like pension
funds, but not necessarily due to the fact that Japan is showing
some signs of overcoming years of deflation.
"The linkers look attractive because compared to actual
inflation expectations, their prices still remain relatively
low," said Katsutoshi Inadome, fixed-income strategist at
Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
It may take another three to six months before inflation
expectations actually play a part in generating demand for the
linkers, although the outlook is murky as the market does not
fully share the Bank of Japan's view that prices will start
rising again after a lull, Inadome said.
The BOJ expects the rise in core consumer prices, which in
May climbed 3.4 percent from a year earlier, to slow over the
next few months before resuming its ascent towards 2015.
Debt-reliant Japan reintroduced the linkers last October for
the first time in years with Prime Minister Shinzo Abe vowing to
revitalise the economy by ending years of deflation.
($1 = 102.1200 Japanese Yen)
(Reporting by Shinichi Saoshiro; Editing by Jacqueline Wong)