February 15, 2013 / 2:26 AM / in 5 years

JGBs gains, 30-year yield hits 7-week low

TOKYO, Feb 15 (Reuters) - Japanese government bonds rose on Friday, with the 30-year yield hitting a seven-week low as life insurers nibbled at longer-dated debt while some hedge funds appeared to be cutting their bearish bets.

* “We are hearing that some of the hedge funds are taking profit on yen-short position, unwinding the steepening trade,” said Tadashi Matsukawa, head of Japan fixed income at PineBridge Investments. “Whenever the yen weakens, the yield curve steepens.”

* The yen was quoted at 92.76 to the dollar on Friday, up from a 33-month low of 94.465 touched on Feb. 11. A halt in the yen’s downtrend also took the wind out of equities, with Tokyo’s Nikkei benchmark down 1 percent on Friday morning.

* “Life insurance companies are currently buying 20-, 30-, 40-year (paper). That kind of absorbs a lot of inventories that we have,” Matsukawa said.

* The 30-year yield dipped 1 basis point to 1.945 percent, its lowest level since Dec. 25, while the 20-year yield inched down 0.5 basis point to 1.750 percent.

* Yields on benchmark 10-year bonds slipped 2 basis points to 0.750 percent. Ten-year JGB futures rose 22 ticks to 144.26, breaking above their five-day moving average of 144.24.

* “Ten-year JGBs are just trading around 0.7 and 0.8 percent. Whenever there are dips, there are buyers,” Matsukawa said. “Whenever they get to the lower 0.7 percent, 0.72 or 0.73 percent, we see profit taking.”

* The five-year yield returned to a record low of 0.135 percent after adding 1 basis point to 0.145 percent in the previous session.

* The short-end of the yield curve has been supported by expectations that the Bank of Japan will step up its asset purchases to meet a 2 percent inflation target, while longer maturities have come under pressure due to the aggressive reflationary policies pursued by the new government of prime minister Shinzo Abe.

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