JGBs edge higher, take respite from recent slide

* JGBs take breather from steep, two-week slide

* JGB yields back near average since April – fund manager

By Masayuki Kitano

TOKYO, Sept 7 (BestGrowthStock) – Lead 10-year Japanese government
bond futures edged higher on Tuesday, drawing support from a dip
in Tokyo shares and regaining some ground after sliding to a
two-month low the previous day.

JGBs have tumbled in the last two weeks as selling by
domestic banks, which had been massive buyers of superlong bonds,
began booking profits before Japan’s fiscal first half ends on
Sept. 30.

The steep sell-off came after a rally in JGBs intensified in
late August and pushed the 10-year JGB yield down to a seven-year
low of 0.895 percent (JP10YTN=JBTC: ) on Aug 25.

Worries that a potential change in the leadership of Japan’s
ruling Democratic Party could undermine the government’s stance
on fiscal austerity have stirred investor jitters and added fuel
to the recent jump in yields.

Lead September 10-year JGB futures inched up 0.09 point to
141.26 (2JGBv1: ), having pulled up from a two-month low of 141.07
hit the previous day.

“This is nothing more than a bit of a rebound in the wake of
a sharp slide,” said Naomi Hasegawa, a senior fixed-income
strategist at Mitsubishi UFJ Morgan Stanley Securities.

On Monday, the lead futures contract fell 0.73 point, the
biggest one-day drop since March 11, when a shift in the
benchmark contract took place.

The Bank of Japan is expected to stand pat in a policy
decision due later on Tuesday after having loosened policy at an
emergency meeting last week through steps such as expanding the
size of its fixed-rate fund supply operation. [ID:nTOE68401G]

The benchmark 10-year JGB yield fell 2 basis points to 1.170
percent (JP10YTN=JBTC: ). The 10-year yield hit a 2-