JGB futures rally on short covering after data

* Futures bought back after US data, before contract rollover

* Futures post biggest 1-day gain since mid-September

* Bernanke comments give psychological support

* 30 yrs lag before auction, curve steepens

By Shinichi Saoshiro

TOKYO, Dec 6 (BestGrowthStock) – Japanese government bonds bounced on
Monday, with the benchmark yield pulling away from a five-month
peak, as investors bought back debt after weaker-than-expected
U.S. jobs data.

Futures rose over half a point on short covering following
the data and ahead of a contract rollover looming at the end of
the week.

“Futures led the way as investors lifted hedges in relief
after the U.S. payrolls, which was last week’s biggest market
event,” said Makoto Noji, a strategist at Mizuho Research &
Consulting, adding that Federal Reserve Chairman Ben Bernanke
saying the central bank could buy more debt gave psychological
support to bonds.

“The market also took Bernanke’s comments as a hint that U.S.
yields will change course and decline going forward, with the Fed
sticking to QEII for its stated duration and even continue buying
bonds afterwards.”

The Fed could end up buying more than the $600 billion in
Treasuries it has committed to purchase if the economy fails to
respond or unemployment stays too high, Bernanke said in a rare
televised interview aired on CBS on Sunday. [ID:nWAL5NE6UB]

December 10-year futures (2JGBv1: ) climbed 0.60 point to
141.48, their biggest one-day gain since mid-September.

The yield curve steepened as 30-year JGBs lagged other
maturities ahead of an auction of the maturity on Tuesday on
selling by dealers making room on their books, market players
said.

The 10-year/30-year yield spread widened by 7.5 basis points
to 97.5 basis points.

Analysts expect the new 30-years to draw ample demand from
absolute level buyers such as life insurers, enticed by the yield
hovering around a six-month high.

The 30-year yield (JP30YTN=JBTC: ) fell 1.5 basis point to
2.130 percent after touching a six-month high of 2.160 percent.

The benchmark 10-year yield (JP10YTN=JBTC: ) dropped 5 basis
points to 1.155 percent after hitting a five-month peak of 1.205
percent on Friday.

The five-year yield (JP5YTN=JBTC: ) declined 4 basis points to
0.395 percent.

A further show of steadiness by Tokyo stocks could, however,
take momentum away from JGBs.

Tokyo’s Nikkei (.N225: ) dipped only 0.1 percent on Monday
despite a surge in the yen following the U.S. jobs data,
supported by bargain hunting. [.T]

“Equities have stood firm and this is a bearish factor for
JGBs. It would bear watching whether the yen’s strength can begin
to weaken them,” said a dealer at a foreign brokerage.

Bernanke’s comments on QEII came in the wake of Friday’s
November jobs numbers, which showed U.S. employment increased by
a far less-than-expected 39,000 jobs. [ID:nN02238002]
(Editing by Joseph Radford)

JGB futures rally on short covering after data