JGBs jump on bargain hunting as US yield rise pauses

* JGBs take back ground lost after week of heavy losses

* Benchmark yield posts biggest one-day decline in two years

* Upcoming 20-yr sale, tankan eyed to help JGBs consolidate

By Shinichi Saoshiro

TOKYO, Dec 10 (BestGrowthStock) – Japanese government bonds rallied
on Friday, with the benchmark yield posting its biggest one-day
decline in two years, as a surge in U.S. yields paused and
allowed the market to take back ground lost after a week of heavy

The bounce in U.S. Treasuries after a sharp two-day plunge
prompted investors to wade in and pick up bonds at bargain
prices, including the new five-year JGBs offered the previous day
with a much higher coupon.

“The slide in JGBs this week can be blamed mostly on selling
by investors trying to cut losses as their foreign bond holdings
suffered,” said a fund manager at a domestic asset management

“The two markets were closely linked this week, so the halt
in the slide by Treasuries stopped the selling in JGBs as well.
JGB yields have risen to very attractive levels when Treasuries
are taken out of the equation.”

March 10-year futures (2JGBv1: ) gained 0.59 point to 139.71 on
short covering after going as low as 139.01 on Thursday.

The 30-year yield (JP30YTN=JBTC: ) fell 4 basis points to 2.215

The benchmark 10-year yield (JP10YTN=JBTC: ) declined 7.5 basis
points to 1.185 percent, pulling sharply away from a six-month
high of 1.270 percent marked the previous day.

Purchases by investors such as pension funds and banks
boosted the long-end, market players said.

The five-year yield (JP5YTN=JBTC: ) dropped 4 basis points to
0.525 percent following an auction of the maturity the previous
day, at which Japan’s Ministry of Finance raised the coupon by 20
basis points to 0.5 percent, the highest in seven months.


Focus in the JGB market is likely to drift back towards
domestic matters next week, analysts said.

“Although it may not have the momentum for a fully fledged
rebound, the JGB market will be looking to consolidate next
week,” said Tetsuya Miura, chief market analyst at Mizuho

“Demand at the 20-year auction (on Tuesday) is likely to be
sufficient with the sale effectively being the last supply hurdle
of the year. The BOJ tankan is likely to be unimpressive and
these two events could ease the downward pressure on debt.”

Japan will sell 1.1 trillion yen ($13 billion) of 20-year
JGBs on Tuesday with the next long-dated bond auction not taking
place until January.

The Bank of Japan’s closely watched December tankan survey
due on Wednesday is likely to show confidence at Japanese firms
fell for the first time in seven quarters as the strong yen and
overseas slowdown muddy the outlook for Japan’s economy.

Treasuries rose on Thursday, retracing a portion of their
dramatic sell-off earlier this week, after an auction of 30-year
bonds met with strong demand. [ID:nN09569263]
(Editing by Joseph Radford)

JGBs jump on bargain hunting as US yield rise pauses