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JGBs firm slightly, bolstered by expectations of more BOJ easing
December 10, 2012 / 2:52 AM / 5 years ago

JGBs firm slightly, bolstered by expectations of more BOJ easing

TOKYO, Dec 10 (Reuters) - Japanese government bonds were slightly firmer on Monday, with benchmark 10-year yields moving back towards a 9-1/2-year low hit last week on expectations for more monetary stimulus.

* Underpinning bonds, revised government data released on Monday showed Japan’s economy contracted for a second straight quarter in the July-September quarter, confirming a mild recession.

* JGBs will likely tread water this week ahead of a national election on Dec. 16, with the majority of respondents to this week’s market poll expecting yields to move sideways.

JGBs gained last week after Japanese media polls showed the opposition Liberal Democratic Party was on track to secure a majority in the election. LDP leader Shinzo Abe, likely to be the country’s next leader, has called for more aggressive stimulus from the Bank of Japan.

* The central bank might even take further easing steps at its final rate review for this year on Dec. 19-20. BOJ Deputy Governor Kiyohiko Nishimura said last week the central bank would debate whether further stimulus is needed to support the economy.

* “JGB yields are pricing in more easing, but not pricing in the expectation that the easy policy will have much effect anytime soon,” said a fixed-income fund manager at a Japanese asset management firm.

* Yields on 10-year JGBs shed half a basis point to 0.700 percent. On Thursday, they fell to 0.685 percent, their lowest level since June 2003.

Yields on benchmark cash bonds ended 2011 at 0.980 percent.

* Ten-year JGB futures added 0.09 point to end morning trade at 145.17, moving close to Thursday’s intraday high of 145.26, which was the highest level ever for 10-year futures. The lead contract ended 2011 at 142.41.

The December contract will expire on Tuesday. The March contract rose 0.06 point to 144.70.

* The superlong sector lagged slightly after gaining late last week in the wake of a strong 30-year auction. The 20-year yield added 1 basis point to 1.655 percent, while the yield on 30-year JGBs was flat at 1.890 percent.

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