Reuters: Market News: JGBs gain on hopes of more policy easing ahead

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JGBs gain on hopes of more policy easing ahead Apr 9th 2012, 07:01 Mon Apr 9, 2012 3:01am EDT * Investors position for BOJ policy decision on Tuesday * 10-yr yield touches 5-week low, 10-yr futures touch 4-week high * JGB market sentiment improves - Reuters survey By Lisa Twaronite TOKYO, April 9 (Reuters) - Japanese government bond prices gained on Monday, pushing the yield on the 10-year cash bond to a five-week low, as investors positioned for more easing steps from the Bank of Japan and a slowdown in U.S. jobs growth raised hopes of more U.S. easing. Bank of Japan policymakers began their two-day meeting on Monday, at which most strategists expect them to refrain from easing monetary policy. But in light of the still-fragile economic recovery, easing steps cannot be ruled out at this meeting or the next one on April 27, and some market participants have positioned for the possibility. "The chances of BOJ steps tomorrow aren't zero, which has pushed yields down to the lower end of recent ranges," said Credit Suisse strategist Shinji Ebihara. The yield on the latest 10-year notes shed 2.5 basis points to 0.960 percent, its lowest level since March 1. The June 10-year JGB futures contract added 0.28 point to end at 142.32, after touching a four-week high of 142.42. Ahead of the BOJ meeting, Prime Minister Yoshihiko Noda met Bank of Japan Governor Masaaki Shirakawa in Tokyo on Friday. While Shirakawa did not say whether the two discussed monetary policy, the meeting led to market speculation that more easing might be raised. "The BOJ probably won't announce any new easing steps tomorrow, but restraint this time would set the stage for it to take steps at its meeting later this month. These expectations are pressuring yields," said a portfolio manager at a Japanese asset management firm. Bond market sentiment was also supported by rising hopes of more monetary stimulus from the U.S. Federal Reserve, after data released on Friday showed U.S. payrolls grew by just 120,000 in March, far below the expected increase of 203,000. BOND SENTIMENT IMPROVES-SURVEY Sentiment in the Japanese government bond market improved sharply, a weekly Reuters survey showed on Monday. The survey's JGB bull-bear diffusion index, calculated by subtracting the number of bearish market players from those that are bullish, jumped to plus 6 from minus 56 in the previous poll, which was the lowest reading since the survey began in June last year. . Weak equities also made safe-haven bonds more appealing. The benchmark Nikkei down for a fifth straight session, losing 1.5 percent and extending last week's 3.9 percent fall, which was its worst weekly performance in eight months. The yield on the 20-year bond yield lost 2.5 basis points to 1.740 percent, after falling as low as 1.735 percent, a more than six-week low, while the 30-year bond yield shed 2 points to 1.935 percent The five-year yield dropped 2 basis points to a four-week low of 0.295 percent. That tenor is supported by expectations that the BOJ will eventually extend the maturities of the bonds it purchases in its asset-buying programme. The central bank now buys bonds with up to two years left to maturity. Markets shrugged off data released on Monday showing Japan's current account balance swung back to a surplus in February after a record deficit the previous month, as improvement in exports added to steady income gains from overseas investments. The surplus eased worries that Japan may soon need to rely on overseas funds to finance its massive public debt. Link this Share this Digg this Email Reprints

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