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JGBs edge higher in thin trade as stocks slip
March 3, 2014 / 4:05 AM / 4 years ago

JGBs edge higher in thin trade as stocks slip

TOKYO, March 3 (IFR) - Japanese government bond prices edged higher in quiet trade on Monday, as slumping equities bolstered the appeal of fixed-income assets.

Many domestic real money accounts took a wait-and-see stance as Tokyo stocks dropped sharply.

The Nikkei stock average was down 1.8 percent in early afternoon trade, as investors’ risk appetite faded due to escalating tensions in Ukraine and as a stronger yen took a toll on exporters’ shares.

The yield on the benchmark 10-year JGB eased half a basis point to 0.575 percent after dropping as low as 0.57 percent, its lowest level since May 7. Gains were limited by caution ahead of Tuesday’s monthly 2.4 trillion yen ($23.51 billion) 10-year JGB auction.

A few dealers seemed to have covered their short positions in the 30-year to 40-year zone ahead of Thursday’s monthly sale of 600 billion yen of 30-year JGBs and a large quarterly redemption of JGBs on March 20, according to JGB traders.

Earlier, the Ministry of Finance published its October-December report on capital spending. Japanese companies raised spending on plant and equipment for a second straight quarter, but rather modestly, suggesting firms were wary of boosting investment in the face of an uncertain economic outlook.

A stronger yen offset any influence from the capex data, according to one pension fund manager at a domestic trust bank.

This morning, the Bank of Japan offered to buy 180 billion yen in JGBs maturing in more than 10 years under its massive JGB buying program.

In early afternoon trading, the yield on the current 5-year JGBs was unchanged from last Friday at 0.175 percent.

In the super-long zone, the 20-year yield fell 1 basis point to 1.425 percent, while the 30-year yield lost 1.5 basis point to 1.625 percent.

Lead March JGB futures moved in a 145.20-145.31 range in the morning session before finishing at midday up 0.11 point at 145.28. In afternoon trade, they were last up 0.07 point at 145.24.

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