Reuters: Market News: JGBs rise, take cues from weaker stocks

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JGBs rise, take cues from weaker stocks Apr 6th 2012, 07:28 Fri Apr 6, 2012 3:28am EDT * 10-yr futures rise to three-week high * Shirakawa, Noda meeting raises BOJ easing hopes * 5-yr yield falls to three-week low By Lisa Twaronite TOKYO, April 6 (Reuters) - Japanese government bond prices gained on Friday, with the front-month futures spurred to a three-week high as stocks slumped on fears about European debt and expectations persisted for further Bank of Japan easing this month. The BOJ is expected to refrain from further quantitative easing steps at a policy-setting meeting on Monday and Tuesday next week, although policy makers could take action at the following meeting on April 27. Prime Minister Yoshihiko Noda met Bank of Japan Governor Masaaki Shirakawa in Tokyo on Friday. Shirakawa did not say whether the two discussed monetary policy, but the meeting raised hopes that more easing is in the pipeline. "I think the meeting's putting a lot of speculation in the market that they will be talking about more QE next week," said Shogo Fujita, chief Japan bond strategist at Bank of America Merrill Lynch. "Or at the latest, they have another meeting later this month and can take steps then." Noda last met Shirakawa the day after the central bank surprised markets on Feb. 14 by increasing the size of its asset buying program and setting an inflation target of 1 percent. The June 10-year JGB futures contract added 0.30 point to close at 142.04, after touching a three-week high of 142.13, while the yield on the latest 10-year notes shed 2 basis points to a one-week low of 0.985 percent. "While we still expect yields to eventually rise, for now the 10-year yield will still struggle around 1 percent, at least until after the BOJ meeting," said a fixed-income manager at a European asset management firm in Tokyo. THROWING IN THE TOWEL JGBs benefited from waning investor appetite for risk after a rise in Spanish and Italian bond yields, which was triggered by Wednesday's worse-than-expected Spanish bond auction, fuelled fears about the ability of European countries to fund their debt. Weak equities also made safe-haven bonds more appealing, with the benchmark Nikkei down for a fourth-straight session, losing 0.8 percent and marking its worst weekly performance in eight months. Bond prices drew additional support from purchases by long-term investors who had recently refrained from buying, expecting higher yields, market participants said. "A lot of life insurance companies were taken off guard, as they had planned to accumulate at higher yield levels which never came, and now they've thrown in the towel and been forced into play," Bank of America Merrill Lynch's Fujita said. The yield on the 20-year bond yield lost a basis point to 1.765 percent, while the 30-year bond yield was flat at 1.955 percent The five-year yield was down 2 basis points at 0.310 percent, after falling to a three-week low of 0.305 percent during the session. The five-year tenor has outperformed since the BOJ's easing on Feb 14. The central bank purchases bonds with up to two years left to maturity in its asset buying programme and many market participants expect that to be extended to five years. Link this Share this Digg this Email Reprints

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