September 12, 2019 / 5:05 AM / 3 days ago

JGBs stabilise after week-long correction; focus on ECB meeting

TOKYO, Sept 12 (Reuters) - Japanese government bond (JGB) prices were little changed on Thursday, stabilising after more than a week of retreat amid rising hopes of easing U.S.-China tensions, as investors looked to the European Central Bank’s policy announcement.

The ECB is widely expected to cut interest rates and deliver other stimulus measures on Thursday, though reports on differences in opinion on resuming a fresh asset-purchase round have also helped to push bond yields around the world.

That is widely expected to be followed by interest rate reduction by the U.S. Federal Reserve next week while some market players think the Bank of Japan, which announced its policy a day after the Fed, will cut rates too.

“Market expectations on easings seem to have gone too far, compared to the current economic fundamentals. We should be wary of further rise in bond yields on disappointment on central bank decisions,” said Noriatsu Tanji, chief fixed income strategist at Mizuho Securities.

Benchmark 10-year JGB futures rose 0.11 points to 154.65.

The 10-year JGB yield fell 0.5 basis points to minus 0.215%, off one-month high of minus 0.200%.

The two-year JGB yield fell 0.5 basis points to minus 0.285%, while the five-year yield fell 1 basis points to minus 0.305%, reversing earlier rise to -0.280%, one-month peak.

The 20-year JGB yield fell 0.5 basis points to 0.150%.

Yields on the longest end of the curve rose slightly after the Bank of Japan did not reduce the size of its bond buying on Thursday.

It bought 400 billion yen of 5-10 year bonds, 140 billion yen of 10-25 year bonds and 40 billion yen of 25-40 year bonds.

BOJ Governor Haruhiko Kuroda said last week yields on superlong bonds have fallen “a bit too far”, sparking speculation that the BOJ may cut buying in the tenor further.

The 30-year JGB yield was flat at 0.285% while the 40-year JGB yield rose 0.5 basis point to 0.320%. (Reporting by Tokyo Markets Team; Editing by Rashmi Aich)

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