JGBs dip on profit-taking; Nikkei resilience weighs

* Nikkei losses limited despite dlr/yen hitting 15-year low

* Real money investor bids underpin JGBs

* Month-end duration extensions seen supporting superlongs

By Shinichi Saoshiro

TOKYO, Oct 26 (BestGrowthStock) – Japanese government bonds were
mostly lower on Tuesday, weighed down by profit-taking and
resilience shown by Tokyo stocks in the face of the yen’s rise to
a 15-year high against the dollar.

Losses were limited, however, with real money investor bids
underpinning longer-dated maturities ahead of expected month-end
durations by index-following investors.

Market players said investors were taking profits by
unwinding some of the long positions built earlier this month
following the Bank of Japan’s easing and ahead of expected
monetary loosening by the Federal Reserve early next month.

“The decline suggests that some participants feel they had
built up excessive long positions on the monetary easing theme in
Japan and the United States,” said Akito Fukunaga, chief rates
strategist at RBS Securities. “What we are seeing is a reaction
to the recent sharp decline in yields.”

The benchmark 10-year yield (JP10YTN=JBTC: ) was up 0.5 basis
point at 0.900 percent after touching a three-week high of 0.905
percent. It had hit a seven-year low of 0.820 percent after the
BOJ’s easing.

The 20-year yield (JP20YTN=JBTC: ) edged up 0.5 basis point to
1.750 percent.

December 10-year futures (2JGBv1: ) closed flat at 143.42 after
trading in a tight 0.16 point range, ending a five-day falling
streak that had taken the lead contract away from a seven-year
peak of 144.31 hit three weeks ago after the BOJ eased.

Some technical indicators suggested futures may be gearing up
for a rebound, with their slow stochastic in oversold territory
below 20.

“From a technical view futures are poised for a bounce any
day now, but any rise could be easily derailed depending on how
the Fed’s easing pans out next month,” said a dealer at a foreign

Ahead of the Federal Reserve’s closely watched Nov. 2-3
meeting, the BOJ holds its a policy meeting on Thursday, and the
focus is on how it may flesh out its 5 trillion yen asset buying
scheme announced when it eased policy three weeks ago.

The Japanese central bank also issues its long-term growth
forecasts and is expected to predict a very slow exit from
deflation, signalling it is ready to ease policy further going
forward if the strong yen threatens to stunt growth.

Japan will offer 2.6 trillion yen ($32.1 billion) of two-year
JGBs on Wednesday and the short-end paper is expected to draw
ample demand with the BOJ committing to a low-rate policy.

Market participants expect month-end duration extensions by
index-following investors to support longer-dated JGB yields this

The Nikkei (.N225: ) share average slipped 0.3 percent, mostly
taking in stride the yen’s advance to a fresh 15-year high
against the dollar the previous day. [.T] [FRX/]
(Editing by Chris Gallagher)

JGBs dip on profit-taking; Nikkei resilience weighs