March 23, 2020 / 7:13 AM / 14 days ago

JGBs rebound as firesales subside, futures break 6-day losing streak

TOKYO, March 23 (Reuters) - Japanese government bond prices gained on Monday, with the benchmark futures posting their first gains in seven sessions as investors selling to cut risks and offset losses made elsewhere have subsided for now.

The market was helped by the Bank of Japan, which bought an extra 800 billion yen of JGBs with three to ten years to maturity, on top of its scheduled buying of super-long bonds.

However, market players said the market’s liquidity remained limited and JGBs could remain unstable given fragile sentiment due to heightened fears about economic damages from the virus and draconian measures adopted around the world to stop it.

Benchmark 10-year JGB futures rose 0.41 point to 151.12 and posted its first session of gains in seven days, while in the cash bond market, the benchmark 10-year JGB yield fell 2.5 basis points to 0.065%.

At the longer end, the 20-year JGB yield fell 1.5 basis points to 0.315% and the 30-year JGB yield fell 0.5 basis points to 0.435%.

Yields on shorter maturities fell even more, with the two-year JGB yield falling 4 basis points to minus 0.210%.

The five-year yield fell 2.5 basis points to minus 0.075%.

In a possible sign that Japanese investors’ selling ahead of their financial year-end on March 31 may have run its course, real estate investment trusts (REITs), which had been popular among investors as bond proxy, gained sharply on Monday.

Tokyo Stock Exchange’s REIT index jumped 13.75%.

On the other hand, tight dollar funding conditions, which is considered to be a major factor behind high volatilities in various asset markets in the world, appeared to continue.

Banks borrowed $34.85 billion from the Bank of Japan’s one-week dollar funding operation on Monday, as dollar liquidity remained tight in financial markets with various players hoarding the currency needed for international settlements.

The amount was the highest since the global financial crisis in 2008.

The BOJ said last week it would conduct dollar funding operations every day in coming weeks to ease tensions in the markets as investors braced for a recession in the global economy. (Reporting by Tokyo Markets Team; Editing by Amy Caren Daniel)

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