June 27, 2013 / 3:06 AM / in 5 years

JGBs gain in line with Treasuries after U.S. GDP revision

TOKYO, June 27 (Reuters) - Japanese government bond prices rose on Thursday, tracking U.S. Treasuries and also lifted by month-end buying by funds.

* An unexpected downward revision to first-quarter U.S. economic growth eased fears that the U.S. Federal Reserve would taper its bond-buying stimulus, which bolstered U.S. debt prices.

* “There is a much stronger tone in the market today, after U.S. yields came down overnight after the data,” said a fixed-income fund manager at a Japanese trust bank.

“There is also lots of adjustment this week, the last trading week of June, which is providing more support,” he added.

* Some funds buy longer-dated JGBs near the end of a month to extend the duration of their portfolios.

* Japanese investors also have more cash to invest as they repatriate funds after unloading foreign debt.

The Ministry of Finance data showed Japanese investors’ net selling of foreign bonds hit its highest level in 14 months last week.

* Not all of that cash is earmarked for bonds, however. Takahiro Mitani, chairman of Japan’s public pension fund, told Reuters on Wednesday that he believes the Tokyo stock market has room to rally to catch up with the share prices of the United States and Europe.

* The 10-year JGB yield dropped 2 basis points to 0.845 percent, while 10-year JGB futures added 0.29 point to 142.25 by the end of morning trade.

* The superlong tenor also showed strength, with the 20-year yield down 1.5 basis points at 1.695 percent.

* The two-year yield was flat at 0.140 percent as the Ministry of Finance offered 2.9 trillion yen of two-year notes with a coupon of 0.2 percent.

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