MONEY MARKETS-Japan T-bill yields unlikely to fall much further

* Focus on possible tweak to BOJ fixed rate fund supply ops

* BOJ rate cut unlikely unless econ enters double dip

TOKYO, Aug 23 (BestGrowthStock) – Yields on Japan’s three-month and
six-month treasury bills are unlikely to fall much from current
levels near 0.11 percent since the Bank of Japan appears to be in
no hurry to lower its overnight call rate.

Market speculation has been rife this month that the BOJ may
soon adopt some form of monetary easing measure to help curb a
rise in the yen, which hit a 15-year peak of 84.72 yen (JPY=: ) to
the dollar on trading platform EBS earlier in August.

Such market speculation strengthened last week as investors
braced for a possible meeting between Japanese Prime Minister
Naoto Kan and BOJ Governor Masaaki Shirakawa on Monday.

Last week, three-month and six-month treasury bills were both
traded at 0.105 percent, as market talk about possible monetary
easing measures picked up steam, said a trader for a Japanese
money broker.

As it turned out, however, Kan and Shirakawa just had a phone
conversation on Monday. While they discussed the yen and agreed
to work closely, Kan did not ask the BOJ to ease monetary policy
further. [ID:nTOE67M02F]

Recent market speculation on possible BOJ easing steps has
centred on possible increases to the amount of the central bank’s
fixed rate fund supply operation from the current 20 trillion yen
($233.6 billion) or extending the duration beyond the current
three months, market players said.

There was also some market talk about other easing measures
such as the possibility of the BOJ lowering its policy target for
the overnight call rate from the current 0.10 percent, although
that was seen as a less likely possibility, said the trader for a
Japanese money broker.

Market players said the BOJ is unlikely to consider such a
rate cut unless Japan’s economic situation becomes more dire,
meaning that yields on short-term treasury bills probably will
not fall much from current levels in the near term.

“There are only 10 basis points left, so I think they will
save it unless there is a situation where the economy
deteriorates,” said a money market trader for a European bank,
referring to the BOJ’s 0.1 percent policy target for the
overnight call rate.

The Tokyo interbank offered rate (TIBOR) on instruments such
as three-month euroyen deposits (ZTIJPY3MD=: ) may ease if the BOJ
tweaks its fixed-rate fund supply operation and that leads to an
increase in the current account balances that financial
institutions hold at the central bank, said the money market
trader for a European bank.

But such a measure by itself is unlikely to have much impact
on other money market rates the European bank trader said.
(Reporting by Masayuki Kitano; Editing by Joseph Radford)

MONEY MARKETS-Japan T-bill yields unlikely to fall much further