JGB market sentiment worsens sharply - Thomson Reuters survey

TOKYO Mon Feb 4, 2013 1:20am GMT

TOKYO Feb 4 (Reuters) - A weekly gauge of sentiment in the Japanese government bond market deteriorated sharply, remaining in negative territory for a fifth straight week as rising global appetite for risk sapped demand for bonds, the latest Reuters poll showed on Monday.

The poll's JGB bull-bear diffusion index, calculated by subtracting the number of bearish market players from those who are bullish, was minus 43, sliding from minus 17 in the previous survey.

More than half of respondents - 53.3 percent - expect JGB yields to rise this week, compared with 38.9 percent in last week's survey.

Those expecting yields to move sideways slipped to 36.7 percent from 38.9 percent, while just 10.0 percent expected rates to fall, down from 22.2 percent in the previous survey.

The median forecast for the benchmark 10-year JGB yield at the end of this week was 0.780 percent, above the forecast of 0.730 percent in the previous survey, and 1 basis point above Friday's closing level of 0.770 percent.

On Monday, the 10-year JGB yield added 2.5 basis points to 0.795 percent, while the benchmark 10-year JGB futures contract fell 0.28 point to 143.78.

A weaker yen and stronger equities continue to weigh on JGB prices. Early on Monday, the Nikkei share average rose to a fresh 33-month high, bolstered by U.S. stocks' surge to five-year highs after robust data showed job growth and improved manufacturing, suggesting the U.S. economic recovery was on track. The dollar touched a fresh 2-1/2-year high of 92.97 yen on Friday.

Supply concerns could also push up yields this week. On Tuesday, the Ministry of Finance will auction 2.4 trillion yen ($25.9 billion) of 10-year notes.

But the Bank of Japan's monetary policy continues to support JGBs, particularly short- and medium-term maturities. Last month, the BOJ doubled its inflation target to 2 percent and made an open-ended commitment to buying assets beginning in 2014.

The online survey of 95 JGB market participants from major institutions received 30 responses, for a response rate of 31.6 percent. These included 14 "real money" investors from institutions such as banks, pension and investment funds, and insurance companies.

The latest survey was conducted from Friday to 8:00 a.m. on Monday (2300 GMT on Sunday). ($1 = 92.6100 Japanese yen) (Reporting by Yoshiyasu Shida; Writing by Lisa Twaronite; Editing by Chris Gallagher)