JGB futures retreat from 7-yr high as profits taken

* 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 new-quarter start

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 prevailed ahead of closely watched U.S.
employment data due later on Friday, with short-term investors
inclined to cut long positions in futures before the release.

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.

Benchmark 10-year JGBs underperformed as dealers sold to
make room on their books ahead of Tuesday’s debt sale of the
maturity.

“The market looked a little overstretched after this week’s
rally and the yen retracing some of its big gains provided some
incentive for JGBs to adjust lower,” said Genji Tsukatani, head
of fixed income investment management at asset manager
Schroders.

September 10-year futures (2JGBv1: ) fell 0.28 point to
141.60, pulling away from a seven-year high of 141.95 struck the
previous day.

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, limiting
Friday’s JGB losses.

“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.”

JGBs stalled on Friday but participants said they saw the
market’s advance resuming, noting there were few factors
preventing a further decline in yields.

“It is not only domestic investors purchasing JGBs, but
foreign real money investors as well. JGBs have performed well
relative to their foreign peers and the stronger yen is also a
source of attraction,” said Tsukatani at Schroders.

The yen touched an 8-