JGB futures pull back from 7-yr high on profit-taking

* JGBs dip on profit-taking before weekend

* Caution ahead of U.S. jobs data also caps JGBs

* Losses limited as sentiment remains bullish

* Two-way flows seen,investors jostle at start of new quarter

By Shinichi Saoshiro

TOKYO, July 2 (BestGrowthStock) – Japanese government bond futures
dipped on Friday, with the previous day’s surge to a seven-year
high inviting profit-taking by investors before the weekend.

A wait-and-see mood also prevailed ahead of closely watched
U.S. employment data due later on Friday, with short-term
investors wary of adding to long positions in futures before the

Following a string of downbeat U.S. indicators recently the
data is being eyed to see if it will further enhance the notion
that the global economic recovery is petering out.

September 10-year futures (2JGBv1: ) fell 0.10 point to 141.78,
pulling away from a seven-year high of 141.95 struck the previous

The dip on Friday came amid a long running rally in JGBs,
which saw the benchmark 10-year yield slide 31 basis points in
April-June to a seven-year low as the euro zone’s sovereign debt
crisis, hopes for fiscal reform in Japan and the prospect of the
global economic recovery losing steam boosted demand for
safe-haven debt.

Market players said sentiment remained strong, keeping
Friday’s JGB losses limited.

“Bullish sentiment has been in control since the 10-year
yield fell below 1.155 percent, the low hit (in December 2008)
following the Lehman shock,” said Shinji Nomura, chief
fixed-income strategist at Nikko Cordial Securities.

In wake of the global financial market turmoil following the
collapse of Lehman Brothers, the benchmark 10-year yield dropped
to a five-year low of 1.155 percent in December 2008, a watershed
that was not breached until last week.

“The market hardly responds to bearish factors while perhaps
overreacting to bullish ones in this kind of situation.”


The yield curve became convex in shape as midterm and
superlong maturity yields were steady to a touch lower, while
those on the long-end rose on selling by dealers making room on
their books ahead a 10-year JGB auction on Tuesday.

Market players said midterm JGBs saw two-way flows from
banks, with some buying for the new quarter while others tried to
book early profits as the July-September quarter began.

The five-year yield (JP5YTN=JBTC: ) dipped 0.5 basis point to
0.320 percent, matching a seven-year low hit the previous day.

The benchmark 10-year yield (JP10YTN=JBTC: ) rose 1.5 basis
points to 1.075 percent after touching a seven-year low of 1.055
percent the previous day.

The 20-year yield declined 0.5 basis point to 1.755 percent
(JP20YTN=JBTC: ), matching an 18-month trough hit the day before.

Persistent weakness in the U.S. housing and labour markets
has further increased doubts about the strength of the global
recovery. A surprise rise in U.S. weekly jobless claims, a
bigger-than-expected fall in pending home sales and
slower-than-forecast manufacturing growth were the latest pieces
of data out of the United States adding to the gloom.
(Editing by Joseph Radford)

JGB futures pull back from 7-yr high on profit-taking