What are JGB futures

JGB futures dip on Nikkei; easing supply woes limit case

AFX News
By Shinichi Saoshiro

TOKYO, Sept 27 (Reuters) - Japanese government bond futures dipped on Monday as a rebound in U.S. business spending pushed Tokyo stocks higher, but ebbing supply concerns and slower growth in Japanese exports kept losses modest.

Japan aims to raise about 4.5 trillion yen ($ 53 billion) in extra funds in the year to March without issuing new government bonds, the Nikkei business daily said on Sunday.

'Supply concerns are abating on views that the government may not have to issue extra debt. Potential JGB selling factors for the upcoming quarter are decreasing, 'said Takafumi Yamawaki, chief fixed income strategist at JP Morgan Securities.

'The market is holding up relatively well. There appears to be a consensus building that the 10-year yield will hold below the 1 percent threshold. '

The benchmark 10-year yield was unchanged at 0.995 percent after hitting a four-week low of 0.980 percent.

Japan's annual export growth slowed for a sixth straight month in August, in a sign that a strong yen and moderating overseas demand could hurt the economy's export-led recovery and prompt the central bank to ease policy further.

The bond market was focused on the Bank of Japan's quarterly survey of business sentiment due on Wednesday and how the yen's appreciation could have dented a recovery in sentiment at a time when expectations for further easing are rising.

Expectations that the BOJ will ease further were turned up a notch last week after the Federal Reserve expressed stronger concerns about low inflation and signaled it was open to future policy loosening.

The BOJ's next scheduled policy meeting is on Oct. 4-5. Easing policy at this meeting still cannot be ruled out, and options include increasing government bond purchases and expanding a cheap fund-supply tool, sources say.

BOJ Governor Masaaki Shirakawa said at a speech on Sunday that Japan will appropriately ease monetary policy if necessary.

Shirakawa also said that if thought of as monetization, central bank purchases of government debt could lead to a rise in yields by stoking future inflation prospects.

'The governor may not come across as a strong proponent of the BOJ raising government bond purchases. But an increasing view is that the central bank will have to do so sooner or later, 'said a dealer at a domestic brokerage.

December 10-year futures fell 0.05 point to 142.83.

The five-year yield rose 0.5 basis point to 0.290 percent and the 20-year yield also edged up 0.5 basis point, to 1.730 percent.

Market players expect month-end duration extensions by index-following investors like pension funds and life insurers to limit any rises in superlong yields this week.

Tokyo's Nikkei share average rose 1.4 percent, ending a three-day falling streak.

(Editing by Chris Gallagher)

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