November 30, 2012 / 3:20 AM / 5 years ago

JGBs drop, taking cue from stocks, as investors book profits

TOKYO, Nov 30 (Reuters) - Japanese government bonds slipped on Friday, with benchmark yields rising off a 9-1/2-year low hit in the previous session, taking their cues from firmer equities.

* The current 10-year cash JGB yield added 1 basis point to 0.720 percent, pulling away from 0.710 percent which was its lowest level since June 2003.

* The benchmark 10-year JGB futures price ended morning trade down 0.08 point at 144.75, moving farther from its Thursday high of 144.87, which was its highest level since June 2003.

* Japanese equities advanced on Friday, with the Nikkei share average rising 0.9 percent.

* “Stocks are firm today, so some investors are taking profits in the 10-year sector, and further selling superlong maturities,” said a fixed-income fund manager at a Japanese asset management firm.

“There might be more selling pressure next week, ahead of the auctions,” he added.

* The Ministry of Finance will offer 2.3 trillion yen of 10-year bonds on Tuesday and 700 billion yen of 30-year bonds on Thursday.

* Even as benchmark yields fell to record lows, superlong maturities have underperformed in recent weeks and the yield curve has steepened on political concerns. Investors expect more pressure on the Bank of Japan to take aggressive easing steps after an election on Dec. 16 that will likely result in a new government.

* Members of the BOJ’s elite monetary affairs department have been drawing up plans for a bolder set of policy options since late last year, people with knowledge of those discussions say, as the bank mulls a “big bang” approach to fighting deflation.

* Yields on 20-year bonds added 1.5 basis points to 1.680 percent, while yields on 30-year bonds rose 1 basis point to 1.940 percent.

* Market reaction was muted to a surprise jump in Japan’s industrial output in October.

Core consumer prices were flat in October compared with a year earlier. The November index for Tokyo, available a month before the nationwide data, showed a drop of 0.5 percent.

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