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JGBs drop as equities soar, but BOJ hopes support
March 14, 2012 / 3:17 AM / 6 years ago

JGBs drop as equities soar, but BOJ hopes support

TOKYO, March 14 (Reuters) - Japanese government bonds skidded on Wednesday as equities rallied after the Federal Reserve upgraded its economic outlook, but their fall was seen limited by buying ahead of the end of Japan’s fiscal year as well as the Bank of Japan’s commitment to easy policy.

* Ten-year JGB futures slipped 0.28 point to 142.19, while the yield on the latest 10-year JGB rose two and a half basis points to a nearly five-week high of 0.995 percent.

* “Given the current situation, with the dollar/yen around 83 and the Nikkei around 10,000, a one-percent yield on the 10-year note looks low,” said a fixed-income portfolio manager at a Japanese asset management company in Tokyo.

“The fact that the 10-year yield is still below one percent shows that there are people willing to buy even at these low levels, and maybe the 10-year yield will be capped ahead of the end of the fiscal year,” he added.

* The benchmark Nikkei stock average gained more than two percent in morning trading on Wednesday, climbing above 10,000 points for a fourth straight session to the highest level since late July.

* A broadly firmer dollar rose to an 11-month high of 83.22 yen.

* The 20-year yield rose two basis points to 1.770 percent even in the face of expected selling of that tenor ahead of Thursday’s auction of 1.1 trillion yen of 20-year notes.

* The JGB market is likely to be supported by expectations of further easing in coming months, as the BOJ is seen extending the maturity of bonds it buys under its asset purchase programme to three-year and five-year durations from its current two-year parameter.

* As widely expected, the BOJ on Tuesday maintained its key policy rate at a range of zero to 0.1 percent and also expanded a separate loan scheme targeting growth industries.

BOJ board member Ryuzo Miyao unsuccessfully proposed a further easing by increasing the bank’s asset-buying and loan scheme by 5 trillion yen ($61 billion), but that proposal was rejected by an 8-1 vote.

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