TOKYO, June 10 (Reuters) – Japanese government bond prices
edged up on Monday, underpinned by hopes that the Bank of Japan
may take steps to reduce volatility in the bond market at a
two-day policy meeting starting later in the day.
* The September 10-year JGB futures, which are likely to
take over the benchmark status from June contracts on Monday,
rose 0.14 point to 142.94 .
* The yield on the current 10-year cash bonds fell 1.0 basis
point to 0.840 percent.. The five-year yield fell
1.5 basis points to 0.270 percent, near four-week
low of 0.265 percent hit on Friday.
* Although JGBs were undermined by a rise in U.S. bond
yields and Japanese share prices following Friday’s solid U.S.
employment data, firm bids from investors in the 10-year sector
helped support the market.
* Market players also say the market is supported by
expectations the BOJ might extend the duration of its fixed-rate
lending beyond one year, to two or even three years.
* Such a measure would likely bring down yields on
short-term bonds, which in turn would help curb volatility in
the longer end of the yield curve, market players say.
* Still, many investors doubt extended lending does the
trick, as the ultimate source of instability in the bonds market
in the past couple of months is the BOJ’s pledge to boost
inflation to 2 percent in two years.
* While most investors think the pledge is unrealistic and
that the BOJ will eventually back down on it one way or another,
concerns that the BOJ could do more radical easing are
discouraging investors.
