* Long-end bonds outperform, leading to yield curve
flattening
* Ten-year yield falls to fresh low in nearly 10 years
TOKYO, March 1 (Reuters) – Japanese government prices inched
higher on Friday, with the 30-year yield hitting a seven-month
low as pension funds picked up long-dated debt to extend the
duration of their portfolios and on expectations the Bank of
Japan will adopt bold monetary easing.
The 10-year yield dipped 1.5 basis point to
0.645 percent after falling as much as 0.640 percent to its
fresh low in nearly 10 years, while 10-year futures
added 7 ticks to 145.09 after hitting a two-month high of
145.21, not far from a record high of 145.26.
The 30-year yield slipped 4.5 basis points to
1.765 percent after dropping as much as 1.750 percent to a
seven-month low.
“It’s more related to the extension trade by pension funds
who need to extend the asset side duration by buying long-end of
the curve to match the underlying index,” said Naomi Muguruma,
senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley
Securities.
“Another factor pushing the yields down is expectations of
aggressive easing by the new BOJ chief,” she said.
Prime Minister Shinzo Abe on Thursday nominated Asian
Development Bank President Haruhiko Kuroda to be BOJ governor
after current chief Masaaki Shirakawa steps down on March 19,
and tapped academic Kikuo Iwata and BOJ official Hiroshi Nakaso
as deputy governors.
The 20-year yield eased 3.5 basis points to
1.570 percent, also touching a seven-month trough and heading
for an eight straight session of fall.
Muguruma said the 10-year yield was likely to trade between
0.600 and 0.700 percent in the near-term as investors were
likely to want to see what policy the new BOJ chief would adopt
in whipping deflation.
Jiji news reported on Thursday that Kuroda’s confirmation
hearing would be on March 4, with the two nominees for the
deputy positions to appear before lawmakers the following day.
