July 31, 2014 / 6:30 AM / in 3 years

JGBs down on weaker Treasuries, buying on the cheap limits losses

TOKYO, July 31 (IFR) - Japanese government bonds fell on Thursday in sympathy with weaker U.S. Treasuries overnight, though dip-buying contained the losses.

Buying was seen from regional investors and even from life insurers, market participants said. Some had thought that investors other than passive pension fund managers would stay sidelined, but apparently many investors were very keen to buy on the cheap.

In addition, there was strong receiving interest in 10-year swaps from early morning, which also helped limit the JGB market’s downside. Domestic banks were believed to be behind the offers in 10-year swaps, and they appeared to be receiving swaps in order to build up their long delta for the current quarter. Japanese bank swap receiving may continue for the time being, one market source said.

On Wednesday, yields on U.S. Treasuries surged after data showed solid U.S. economic growth, though the Federal Reserve said it is in no rush to raise interest rates.

The two-year Treasury yield jumped to 0.59 percent, its highest in over three years.

JGB yields also rose, though the uptick was much more moderate. The benchmark 10-year JGB yield rose 0.5 basis point to 0.530 percent, after earlier rising to 0.535 percent. The 20-year yield added 1 basis point to 01.395 percent, while the 30-year yield rose 1.5 basis point to 1.680 percent,

September 10-year JGB futures were down 0.06 point at 145.92. (Reporting by Takahiro Okamoto; Editing by Shri Navaratnam)

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