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JGBs fall, with 10-year futures hitting 3-month low
December 26, 2012 / 2:25 AM / in 5 years

JGBs fall, with 10-year futures hitting 3-month low

TOKYO, Dec 26 (Reuters) - Japanese government debt fell on Wednesday, with the 10-year bond futures hitting a three-month low, on expectations that incoming Prime Minister Shinzo Abe would increase pressure on the central bank to ease policy further.

* The 10-year yield added 1.5 basis point to 0.780 percent, matching a six-week high touched on Dec. 19, while JGB 10-year futures fell 27 ticks to 143.65 in active trade, their lowest level since Sept. 20.

“Mr Abe and the Liberal Democratic Party look like they want the dollar/yen to be at least above 85, or possibly 90. They want the yen to be weaker than the current level,” said Tadashi Matsukawa, head of Japan fixed income at PineBridge Investments.

“We continue to see equities going high, so the pressure is on the long-end of the JGB curve. For the short-end of the curve, we continue to see the BOJ ease aggressively, so there is no change in that.”

* BOJ policymakers debated their various options, such as an open-ended commitment to buy assets, as early as in November, minutes from the central bank’s rate review showed, a sign that they were already leaning toward action back than on the worsening economic outlook.

* Yields on the 30-year bonds added 1.5 basis points to 1.950 percent, while those on the 20-year debt rose 2.5 basis points to 1.740 percent.

* Japan’s Nikkei share average advanced 0.4 percent on Wednesday, while the yen fell to a 20-month low against the dollar at 85.38 yen. The Nikkei has risen nearly 17 percent over the past six weeks, spurred by the yen weakness.

* Matsukawa said he expected the 10-year yield to reach 0.80 percent in early 2013 and to trade between 0.90 and 1.0 percent in the middle of next year.

* Yields on 2-year bonds were unquoted ahead of the auction of 2.7 trillion yen ($31.8 billion) worth of two-year debt later in the day.

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