By Shinichi Saoshiro
TOKYO, April 13 (Reuters) - Japanese government bonds rose on Tuesday with futures lifted by cross-asset trades as Tokyo's Nikkei average fell, while the yield curve's recent flattening stalled following a mediocre 30-year debt sale.
June 10-year futures gained 0.37 point to 138.60, helped by purchases by commodity trading advisers who also sold stock futures and hedge funds establishing long positions, market players said.
The Nikkei shed 0.8 percent on profit-taking amid concerns about overheating after it rose sharply to an 18-month high last week.
A re-opening of the 2.3 percent coupon 30-year JGB on Tuesday drew moderate demand after the maturity was regarded as expensive following the recent bull run by superlongs that took it to a four-month low the previous week.
The bid-to-cover ratio, a gauge of demand at auctions, came in at 3.73, above the average 3.48 in the past 12 sales. But the tail, the difference between the lowest and average accepted price and another indicator of demand, widened to 0.25 from 0.08 at the previous sale in March and was the widest since the December tender.
'The 30-year zone had rallied too much going into the auction, taking the yield down to levels no longer attractive to investors,' said Takafumi Yamawaki, a senior rates strategist at BNP Paribas Securities.
'The curve's flattening may now stall but this won't mean it will begin steepening rapidly as life insurers' underlying demand for 30-year debt remains strong.'
Dai-ichi Life Insurance, Japan's second-largest insurer by assets, told Reuters in an interview on Tuesday it wants to increase holdings of superlong JGBs if yields rise.
Life insurers are one of the main buyers of superlong debt, which is purchased to match the duration of their assets with liabilities.
The 10-year/30-year spread widened a touch to 84.5 basis points after earlier going below 83 basis points to its narrowest since November.
The yield curve has flattened this month due to strong demand at the start of the fiscal year on April 1 from such investors as pension funds and life insurers.
The 30-year yield was unchanged at 2.225 percent after hitting a four-month low of 2.200 percent last week.
The benchmark 10-year yield fell 1.5 basis points to 1.380 percent and the five-year yield declined 2 basis points to 0.530 percent.
With short- to mid-term JGB yields having been pinned down by the Bank of Japan's easy monetary policy designed to combat deflation and help the economy, the focus is on how long the central bank will stick to such a stance in the wake of upbeat signs for the economy.
Though due in large part to rising energy and commodity prices, wholesale prices fell 1.3 percent in the year to March to mark the smallest drop in more than a year, BOJ data showed.
The BOJ may raise its consumer price forecast for next fiscal year as wholesale price falls narrow, but analysts say it will stick to its easing bias for now as deflation grinds on and firms struggle to pass on higher costs to consumers.
'Both wholesale and consumer prices are likely to stay on an upward bias in the coming months,' said Junko Nishioka, chief Japan economist at RBS Securities.
'But this is unlikely to lead to a change in the Bank of Japan's loose monetary policy as the BOJ focuses on price trends rather than short-term moves.'
($1=93.21 Yen)
(Editing by Michael Watson)
((shinichi.saoshiro@thomsonreuters.com; Reuters Messaging: shinichi.saoshiro.reuters.com@reuters.net; +81-3-6441-1774)) Keywords: MARKETS JAPAN JGB (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
TOKYO, April 13 (Reuters) - Japanese government bonds rose on Tuesday with futures lifted by cross-asset trades as Tokyo's Nikkei average fell, while the yield curve's recent flattening stalled following a mediocre 30-year debt sale.
June 10-year futures gained 0.37 point to 138.60, helped by purchases by commodity trading advisers who also sold stock futures and hedge funds establishing long positions, market players said.
The Nikkei shed 0.8 percent on profit-taking amid concerns about overheating after it rose sharply to an 18-month high last week.
A re-opening of the 2.3 percent coupon 30-year JGB on Tuesday drew moderate demand after the maturity was regarded as expensive following the recent bull run by superlongs that took it to a four-month low the previous week.
The bid-to-cover ratio, a gauge of demand at auctions, came in at 3.73, above the average 3.48 in the past 12 sales. But the tail, the difference between the lowest and average accepted price and another indicator of demand, widened to 0.25 from 0.08 at the previous sale in March and was the widest since the December tender.
'The 30-year zone had rallied too much going into the auction, taking the yield down to levels no longer attractive to investors,' said Takafumi Yamawaki, a senior rates strategist at BNP Paribas Securities.
'The curve's flattening may now stall but this won't mean it will begin steepening rapidly as life insurers' underlying demand for 30-year debt remains strong.'
Dai-ichi Life Insurance, Japan's second-largest insurer by assets, told Reuters in an interview on Tuesday it wants to increase holdings of superlong JGBs if yields rise.
Life insurers are one of the main buyers of superlong debt, which is purchased to match the duration of their assets with liabilities.
The 10-year/30-year spread widened a touch to 84.5 basis points after earlier going below 83 basis points to its narrowest since November.
The yield curve has flattened this month due to strong demand at the start of the fiscal year on April 1 from such investors as pension funds and life insurers.
The 30-year yield was unchanged at 2.225 percent after hitting a four-month low of 2.200 percent last week.
The benchmark 10-year yield fell 1.5 basis points to 1.380 percent and the five-year yield declined 2 basis points to 0.530 percent.
With short- to mid-term JGB yields having been pinned down by the Bank of Japan's easy monetary policy designed to combat deflation and help the economy, the focus is on how long the central bank will stick to such a stance in the wake of upbeat signs for the economy.
Though due in large part to rising energy and commodity prices, wholesale prices fell 1.3 percent in the year to March to mark the smallest drop in more than a year, BOJ data showed.
The BOJ may raise its consumer price forecast for next fiscal year as wholesale price falls narrow, but analysts say it will stick to its easing bias for now as deflation grinds on and firms struggle to pass on higher costs to consumers.
'Both wholesale and consumer prices are likely to stay on an upward bias in the coming months,' said Junko Nishioka, chief Japan economist at RBS Securities.
'But this is unlikely to lead to a change in the Bank of Japan's loose monetary policy as the BOJ focuses on price trends rather than short-term moves.'
($1=93.21 Yen)
(Editing by Michael Watson)
((shinichi.saoshiro@thomsonreuters.com; Reuters Messaging: shinichi.saoshiro.reuters.com@reuters.net; +81-3-6441-1774)) Keywords: MARKETS JAPAN JGB (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.