By Masayuki Kitano
TOKYO, Sept 10 (Reuters) - Lead December 10-year Japanese government bond futures inched lower on Friday, taking in their stride news that a small, unlisted bank was expected to file for bankruptcy protection.
Analysts noted that the Incubator Bank of Japan, which the financial regulator said was expected to file for bankruptcy protection on Friday, was not used for the settlement of money transactions and said its filing was unlikely to have much direct impact on JGBs.
'It's not that big a bank. Also, people had imagined that something like this could happen and it wasn't much of a market topic to begin with,' said Kazuhiko Sano, fixed income strategist for Tokai Tokyo Securities.
Bank of Japan Governor Masaaki Shirakawa said in a statement that Incubator Bank's failure did not pose any adverse effects for bank system stability.
Shirakawa also cited the Financial Services Agency as saying that the bank did not raise funds from interbank money markets.
Lead December 10-year JGB futures dipped 0.17 point to 141.45 , inching back towards the two-month low for a benchmark futures contract of 141.07 hit earlier this week.
The benchmark 10-year JGB yield edged up 1.5 basis point to 1.135 percent.
If JGBs were to show any reaction to the news about Incubator Bank, it would likely be in the direction of flight-to-safety buying, said Katsutoshi Inadome, fixed income strategist for Mitsubishi UFJ Morgan Stanley Securities.
For now, JGBs seem to be taking their cues from other factors, such as a rise in Tokyo share prices, Inadome said, adding that investors were likely reluctant to tilt positions too heavily in one direction ahead of the ruling Democratic Party's leadership election next Tuesday.
FIVE-YEAR AUCTION
The Ministry of Finance offered 2.4 trillion yen ($28.62 billion) in no. 91 five-year JGBs with a coupon rate of 0.4 percent later on Friday.
Inadome said the auction was likely to go smoothly, with some investors looking for a place to park excess cash.
The no. 90 five-year JGB yield edged up 1 basis point to 0.315 percent.
One potentially negative factor for five-year JGBs is the fact that they now look a bit pricey on the yield curve, at least compared to superlong JGBs.
The five-year/20-year yield spread stands at 160 basis points, just off a three-month high of 160.5 basis points hit earlier this week.
The yen's export-sapping rise to a 15-year peak against the dollar this week and the possibility of further BOJ monetary easing are seen as supportive factors for medium-term JGBs.
The BOJ stood pat on monetary policy on Tuesday but vowed timely action when needed.
Possible steps that the BOJ may consider next include expanding the size of its fund-supply operation to support the foundations of growth or extending the duration of a new six-month fixed rate fund injection scheme to one year, said Shinsuke Kanabu, joint general manager at money broker Central Tanshi Co Ltd's management planning division.
The BOJ, however, seems unlikely to resort to lowering its overnight call rate target from 0.1 percent unless the economy deteriorates further and falls into a deflationary spiral, Kanabu added.
'I don't think too many people in the money market are thinking specifically about the possibility of an interest rate cut,' he said.
($1=83.86 Yen)
(Reporting by Masayuki Kitano; Editing by Joseph Radford)
((masayuki.kitano@thomsonreuters.com; Reuters Messaging: masayuki.kitano.reuters.com@reuters.net; +81-3-6441-1872)) 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, Sept 10 (Reuters) - Lead December 10-year Japanese government bond futures inched lower on Friday, taking in their stride news that a small, unlisted bank was expected to file for bankruptcy protection.
Analysts noted that the Incubator Bank of Japan, which the financial regulator said was expected to file for bankruptcy protection on Friday, was not used for the settlement of money transactions and said its filing was unlikely to have much direct impact on JGBs.
'It's not that big a bank. Also, people had imagined that something like this could happen and it wasn't much of a market topic to begin with,' said Kazuhiko Sano, fixed income strategist for Tokai Tokyo Securities.
Bank of Japan Governor Masaaki Shirakawa said in a statement that Incubator Bank's failure did not pose any adverse effects for bank system stability.
Shirakawa also cited the Financial Services Agency as saying that the bank did not raise funds from interbank money markets.
Lead December 10-year JGB futures dipped 0.17 point to 141.45 , inching back towards the two-month low for a benchmark futures contract of 141.07 hit earlier this week.
The benchmark 10-year JGB yield edged up 1.5 basis point to 1.135 percent.
If JGBs were to show any reaction to the news about Incubator Bank, it would likely be in the direction of flight-to-safety buying, said Katsutoshi Inadome, fixed income strategist for Mitsubishi UFJ Morgan Stanley Securities.
For now, JGBs seem to be taking their cues from other factors, such as a rise in Tokyo share prices, Inadome said, adding that investors were likely reluctant to tilt positions too heavily in one direction ahead of the ruling Democratic Party's leadership election next Tuesday.
FIVE-YEAR AUCTION
The Ministry of Finance offered 2.4 trillion yen ($28.62 billion) in no. 91 five-year JGBs with a coupon rate of 0.4 percent later on Friday.
Inadome said the auction was likely to go smoothly, with some investors looking for a place to park excess cash.
The no. 90 five-year JGB yield edged up 1 basis point to 0.315 percent.
One potentially negative factor for five-year JGBs is the fact that they now look a bit pricey on the yield curve, at least compared to superlong JGBs.
The five-year/20-year yield spread stands at 160 basis points, just off a three-month high of 160.5 basis points hit earlier this week.
The yen's export-sapping rise to a 15-year peak against the dollar this week and the possibility of further BOJ monetary easing are seen as supportive factors for medium-term JGBs.
The BOJ stood pat on monetary policy on Tuesday but vowed timely action when needed.
Possible steps that the BOJ may consider next include expanding the size of its fund-supply operation to support the foundations of growth or extending the duration of a new six-month fixed rate fund injection scheme to one year, said Shinsuke Kanabu, joint general manager at money broker Central Tanshi Co Ltd's management planning division.
The BOJ, however, seems unlikely to resort to lowering its overnight call rate target from 0.1 percent unless the economy deteriorates further and falls into a deflationary spiral, Kanabu added.
'I don't think too many people in the money market are thinking specifically about the possibility of an interest rate cut,' he said.
($1=83.86 Yen)
(Reporting by Masayuki Kitano; Editing by Joseph Radford)
((masayuki.kitano@thomsonreuters.com; Reuters Messaging: masayuki.kitano.reuters.com@reuters.net; +81-3-6441-1872)) 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.