TOKYO, Sept 7 Japanese government bonds rose on
Wednesday as they took cues from the U.S. treasury yields, which
dropped to two-week lows after downbeat U.S. data.
The Institute for Supply Management's non-manufacturing
purchasing managers' index fell short of expectations and marked
it biggest one-month drop since November 2008, giving the U.S.
Federal Reserve no incentive to hike interest rates as early as
The benchmark 10-year yield fell 3 basis points to minus
0.055 percent, while September 10-year futures
ended up 0.30 point at 151.48.
Longer maturities outperformed, with the 30-year JGB yield
skidding 7 basis points to 0.420 percent and the
20-year yield shedding 5 basis points to 0.360 percent
The 30-year yield had risen as high as 0.545 percent on
Monday, its highest level since late March, as investors feared
that the Bank of Japan might disappoint at its next policy
meeting on Sept. 20-21 when it will conduct a comprehensive
review of the impact of its massive stimulus programme.
"Initially, the JGB market started to fear de facto tapering
by the BOJ, or changing negative interest rates," said Naomi
Muguruma, senior strategist, Mitsubishi UFJ Morgan Stanley
In a speech on Monday, BOJ Governor Haruhiko Kuroda
signalled his readiness to ease monetary policy further, though
he refrained from specifying any aggressive steps.
On Tuesday, a 30-year JGB auction met with firm demand,
"The yield curve steepened, and we started to see some
buy-on-dip-demand from real money investors," Muguruma said.
However, investor sentiment remained wary, she said, noting
the Sankei newspaper's report of discord among BOJ policymakers
ahead of the central bank's meeting.
(Reporting by Tokyo markets team; Editing by Sherry