October 29, 2012 / 1:05 AM / in 5 years

JGB market mood turns less positive-Thomson Reuters survey

TOKYO, Oct 29 (Reuters) - A weekly gauge of sentiment in the Japanese government bond market turned lower but remained in positive territory for a second straight week, with most respondents expecting benchmark yields to stay in their recent range, a Thomson Reuters survey found on Monday.

The weekly poll’s JGB bull-bear diffusion index, calculated by subtracting the number of bearish market players from those who are bullish, came in at plus 4, deteriorating from plus 12 in the previous week’s poll, which was the first positive figure after three weeks of negative readings.

The survey found that most respondents still foresee that JGB yields will trade sideways, with 51.9 percent expecting this, up from 45.5 percent in last week’s results. “Sideways” was the top response for the fourth straight week.

Since Sept. 24, the yield on the benchmark 10-year JGB has fluctuated in a 4 basis-point range between 0.755 percent and 0.795 percent.

The percentage of respondents expecting lower rates slipped to 25.9 percent from 33.3 percent in last week’s poll, while 22.2 percent of respondents foresee JGB yields rising this week, slightly up from 21.2 percent in the last survey.

The median forecast for the 10-year JGB yield for the end of this week was 0.770 percent, one basis point below the prediction in last week’s poll and one basis point above Friday’s closing level.

Monetary policy was cited as the most significant factor for the JGB market this week by 77.8 percent of respondents, up from 30.3 percent in the previous poll. The influence of overseas rates was cited by 48.1 percent as the most significant for the market, down from 57.6 percent, and domestic supply/demand factors were cited by 40.7 percent, down from 51.5 percent in the previous week.

At its meeting on Tuesday, the Bank of Japan is expected to further ease monetary policy and might make a stronger commitment to continue pumping cash until its 1 percent inflation is achieved, sources have said. Central bankers broadly agree on the need to expand stimulus for the second straight month, most likely by increasing the BOJ’s asset buying and lending programme by at least 10 trillion yen ($125 billion).

On Monday, the benchmark 10-year yield rose half a basis point to 0.765 percent, while ten-year JGB futures inched down 0.02 point 144.22.

The online survey of 92 JGB market participants from major institutions received 27 responses, for a response rate of 29.3 percent. These included 13 responses from “real money” investors from institutions such as banks, pension and investment funds and insurance companies.

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