REFILE-JGBs fall as Nikkei climbs to 3-mth closing high

(Changes headline, first paragraph to clarify that Nikkei rose
to a 3-mth closing high)

* Continuing demand for risk assets to keep weighing on JGBs

* But recent yield rise may favour Tuesday’s 40-year sale

* Sale eyed to provide yield curve with near-term direction

By Shinichi Saoshiro

TOKYO, Nov 8 (BestGrowthStock) – Japanese government bonds dipped on
Monday as Tokyo stocks advanced to a three-month closing high,
with the market eyeing an upcoming 40-year sale to provide the
yield curve with near-term direction.

Market players said government bonds were likely to remain on
the back foot for the time being after the Federal Reserve’s
decision to pump $600 billion to boost a flagging recovery last
week triggered investor demand for riskier assets such as stocks.

“The Fed’s easing and the risk-on trades that followed
significantly weakened support for JGBs by lifting equity and
commodity prices and stopping the yen’s appreciation against the
dollar,” said Makoto Noji, a strategist at Mizuho Research &
Consulting.

The benchmark 10-year yield (JP10YTN=JBTC: ) climbed 3 basis
points to 0.955 percent, pulling further away from a seven-year
trough of 0.820 percent struck last month.

“The market is beginning to see 1 percent for the 10-years as
the next key level support, although it may not provide much of a
ceiling if the Nikkei approaches the 10,000 threshold,” Noji
said.

The Nikkei (.N225: ) rose 1.1 percent on Monday to a
three-month closing high of 9,732. The index surged 4.6 percent
last week to book its best week in a year, riding a rally in
global stocks sparked by the Fed’s easing. [.T]

December 10-year futures (2JGBv1: ) fell 0.25 point to 142.86,
edging towards a five-week low of 142.81 struck last week.

“Bargain hunters are growing more cautious and they may soon
choose to go on the sidelines to see how long the slip
continues,” said a dealer at a foreign brokerage.

But market players also pointed out that the recent rise in
bond yields may stir investor demand from buy and hold investors
at Tuesday’s 300 billion yen ($3.7 billion) 40-year JGB auction.

The small offer amount and the cheapness of the 40 years
compared to other superlongs such as 30 years and 20 years could
also favour the sale, analysts said.

A confirmation of demand is expected to help ease recent
steepening pressure on the yield curve.

After last week’s monetary policy meetings by the Fed and the
Bank of Japan, market focus began shifting towards Japan’s budget
plan for the next fiscal year and whether the government can
stick to its target of keeping new bond issuance at or below 44
trillion yen.

The BOJ revealed the details of its 5 trillion yen
asset-buying scheme on Friday after standing pat on monetary
policy.

The asset-buying plan, introduced last month as a part of the
BOJ’s easing, will encompass exchange-traded funds (ETFs) real
estate investment trust funds (REITs) and shorter maturity JGBs.

BOJ deputy governor Hirohide Yamaguchi said on Monday the
central bank is ready to act flexibly and boost the fund if
economic conditions worsen. [ID:nTKB007146]

The five-year yield (JP5YTN=JBTC: ) climbed 2 basis points to
0.325 percent and the 30-year yield (JP30YTN=JBTC: ) advanced 1.5
basis points to 2.005 percent.
(Editing by Joseph Radford)
([email protected]; Reuters Messaging:
[email protected]; +81-3-6441-1774))

REFILE-JGBs fall as Nikkei climbs to 3-mth closing high