TOKYO, Oct 26 (Reuters) – Yields on benchmark Japanese
government bonds inched higher on Friday, while those on
shorter-dated five-year bonds slipped, supported by strong
expectations that the Bank of Japan will further ease monetary
policy next week.
* The 10-year yield rose 0.5 basis point to
0.780 percent, while 10-year JGB futures were flat at
144.04 after the morning session, holding just above the 5-day
moving average at 144.03.
* The Ministry of Finance (MOF) is to hold a meeting with
JGB primary dealers later in the day to discuss contingency
plans in case there was a delay in the passage of a
deficit-financing bill.
* If the Japanese parliament fails to pass the bill, it
would prevent MOF from issuing bonds, with which to fund
government spending, a similar situation to the U.S. debt
ceiling impasse last year.
* Shogo Fujita, chief Japan bond strategist at Bank of
America Merrill Lynch, said it would lead to a steepening of the
yield curve, especially the longer end sector, if the bill was
not passed in the Diet.
“Politicians are reasonable people and they will probably
pass the bill by the end of November. Everything will be much
ado about nothing. But every day, as time passes, people are
starting to ponder the worse case scenario,” he said.
* The 30-year debt were untraded on Friday
morning, while the 20-year bond were flat at
1.690 percent.
* Yields on 30-year bonds have risen 6.5 basis points so far
this month, leading to a steepening of the yield curve.
Fujita said the rise in 30-year bond yields were probably
due to the political factor and investors positioning in the
start of the second half of Japan’s financial year ending March
2013.
* The five-year yield edged down 0.5 basis
point to 0.190 percent.
* Mounting expectations of more monetary easing measures,
including an increase in the size of BOJ’s asset buying
programme, supported bonds, especially shorter maturities. The
central bank now buys bonds with up to three years left to
maturity in its asset purchase programme.
