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JGBs slip, taking cue from weaker yen and stronger stocks
April 22, 2013 / 2:51 AM / 5 years ago

JGBs slip, taking cue from weaker yen and stronger stocks

TOKYO, April 22 (Reuters) - Japanese government bonds slipped slightly on Monday, taking their cue from a weaker yen and stronger equities markets, but moves were small as market participants awaited a Bank of Japan meeting later in the week.

* The BOJ will update its forecasts at its April 26 policy meeting. Investors will be watching whether BOJ Governor Haruhiko Kuroda’s two-year time frame to attain its 2 percent inflation target becomes an official forecast.

* “Stocks are up, the yen is down and bonds are quiet today,” said a fixed-income fund manager at a Japanese trust bank.

“If the BOJ’s easing steps work, we will eventually have to start pricing in inflation at the longer end, but for now, ahead of Golden Week, big market moves aren’t likely,” he added.

* The yield on benchmark 10-year bonds added half a basis point to 0.585 percent. It moved further away from its record low of 0.315 percent struck on April 5, the day after the BOJ shocked markets with its pledge to double its bond holdings in two years to help it meet the goal of 2 percent inflation.

* Japan’s central bank governor and finance minister reiterated on Monday that the Group of 20 countries accepted that Japan’s monetary easing is not aimed at weakening the yen.

That helped the yen start the new week near a four-year low versus the dollar, not far from the 100-yen level that it has not crossed since April 2009. The weaker yen in turn helped push the Nikkei share average close to a five-year high.

* The 10-year futures contract ended morning trading down 0.02 point at 144.56, after moving in a narrow range between 144.51 and 144.64.

* The 20-year yield added half a basis point to 1.435 percent, while the 30-year bond was so far untraded, its yield having closed on Friday at 1.545 percent.

* In addition to the BOJ, market participants also awaited investment plans for this fiscal year through March 2014 from several major Japanese life insurers.

Domestic life insurers hold $3.4 trillion in assets, and the BOJ’s aggressive stimulus is likely to lead them to shift some of their money into foreign bonds. But the head of Japan’s life insurance industry group said on Friday that such a shift would likely be temporary, with JGB yields likely to move up in the medium term as a result of the BOJ’s measures. [ID:nL3N0D6G6G

* Strategists at Barclays Japan advise closing the 10-year/20-year flattener they had previously recommended.

“The stability at the short end, albeit fragile, may well slow the belly (10-year) cheapening that has been our theme since the April MPM (BOJ monetary policy meeting),” they said in a note to clients on Monday.

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