JGBs gain but stocks’ resiliency curbs rise

* JGBs surge early on flight-to-safety on Korea tension

* Gains curbed as stocks show resiliency, trim much of losses

* Futures manage to pull away from 2-month low

By Shinichi Saoshiro

TOKYO, Nov 24 (BestGrowthStock) – Japanese government bonds gained on
Wednesday but surrendered much of their earlier flight-to-safety
gains, as stocks showed resiliency and pared losses despite
tensions on the Korean peninsula.

JGBs surged in early trade as investors sought safe havens in
an initial reaction to the previous day’s shelling of a South
Korean island by the North. Tokyo markets were closed on Tuesday
for a national holiday.

But buying lost steam as Asian stocks cut much of their
earlier losses. The Nikkei (.N225: ) average ended the day down 0.8
percent after losing as much as 2.1 percent. [.T]

“The Nikkei’s show of strength towards the day’s end slowed
the JGB advance by prompting profit-taking,” said Hidenori
Suezawa, chief strategist at Nikko Cordial Securities.

“We could see bonds resuming their retreat amid signs that
the flight to safety has run its course — for example stocks in
South Korea, the epicentre of the tension, have already proved
resilient.”

Seoul shares (.KS11: ) ended down 0.2 percent on Wednesday
after shedding as much as 2.4 percent.

December 10-year JGB futures (2JGBv1: ) climbed 0.13 point to
141.36, with profit-taking nudging the contract away from the
day’s high of 141.65. Futures hit a two-month low of 141.23 on
Monday.

Market players said speculators covered shorts in bond
futures but were less enthusiastic about going long given
equities’ performance on Wednesday.

JGB prices had fallen steadily this month in the face of a
rising Nikkei, which earlier this week was up more than 10
percent from a two-month closing trough hit just prior to the
Federal Reserve’s Nov. 3 decision to pump the markets with
liquidity.

The five-year yield (JP5YTN=JBTC: ) declined 1.5 basis points
to 0.400 percent.

The benchmark 10-year yield (JP10YTN=JBTC: ) was flat at 1.125
percent after touching 1.105 percent as participants with heavy
inventories sold ahead of an auction of the maturity next week.

“Dealers’ inventories of cash bonds are beginning to pile up,
and their selling to lighten such positions capped JGB prices,”
said a trader at a domestic brokerage.

The 20-year yield dipped 1 basis point to 1.930 percent
(JP20YTN=JBTC: ).

North Korea on Tuesday fired dozens of artillery shells at a
South Korean island, prompting a return of fire by the South
which warned of “enormous retaliation” if Pyongyang took more
aggressive steps. [ID:nL3E6MN0SQ]
(Editing by Chris Gallagher)

JGBs gain but stocks’ resiliency curbs rise