December 14, 2012 / 3:00 AM / 5 years ago

Benchmark JGBs steady ahead of weekend election

TOKYO, Dec 14 (Reuters) - Benchmark Japanese government
bonds were steady on Friday ahead of this weekend's election,
which is likely to bring the conservative Liberal Democratic
Party back to power and set the stage for more fiscal and
monetary stimulus.
    * Yields on 10-year JGBs were flat at 0.725
percent, after adding 2.5 basis points on Thursday to a two-week
high and moving away from last week's 9 1/2 year low of 0.685
    * Ten-year JGB futures for March ended morning
trade down 0.05 point at 144.35 point.
    * The latest polls show Japan's general election on Sunday
is likely to result in a decisive victory for the opposition
LDP, whose leader, Shinzo Abe, has called for the Bank of Japan
to take more drastic steps to lift the economy and pull the
country out of deflation. 
    The so-called "Abe trade" in recent weeks has led to a
weaker yen. It has also pressured prices of longer-dated JGBs on
inflation fears and led the yield curve to steepen.

    * The Bank of Japan's latest tankan survey released on
Friday showed business sentiment worsened for a second straight
quarter in the three months to December and will barely improve
early next year, adding to pressure on the central bank to do
more. [ID:nL4N09M2TJ
    The BOJ will hold its last 2012 policy meeting on Wednesday
and Thursday. It will most likely increase its asset-buying and
lending programme, currently at 91 trillion yen ($1.1 trillion),
by another 5-10 trillion yen, sources have said. 
    * "The tankan results weren't good, though the market
shrugged them off. But the long end is coming under pressure
again, expecting more stimulus after the election," said a
fixed-income fund manager at a Japanese asset management firm.
    * Yields on 30-year JGBs <JP30YT    N=JBTC> and those on
20-year bonds both added half a basis point to
1.945 percent and 1.700 percent respectively.

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