January 17, 2020 / 4:09 AM / a month ago

JGBs supported by cloudy domestic outlook

SINGAPORE, Jan 17 (Reuters) - Japanese government bond prices found support on Friday from familiar fears that the economy will stay stuck in the slow lane, even amid recent signs of a global recovery.

Benchmark 10-year JGB futures rose 0.03 points to 151.94 in thin trade, with volumes of 10,251 lots.

Yields on shorter-dated paper were steady, with the two-year JGB yield flat at minus 0.130% and the five-year yield holding at minus 0.095%.

The 10-year JGB yield was flat at 0.005%, after flirting with zero earlier in the week, while longer-dated yields fell.

The signing of the Sino-U.S. trade deal, easing of fears in the Middle East and signs of strength in Chinese industrial output last month have had investors optimistic.

“Investors may see that interest rates are rising and there is no need to buy in haste,” said Takenobu Nakajima, senior interest rate strategist at Nomura Securities.

Japan’s government is expected to submit to parliament a record $934 billion draft budget for the next fiscal year, after managing to secure parliamentary approval for a $122 billion fiscal package aimed at holding up growth.

Japanese manufacturers remained in a pessimistic mood this month, a Reuters Tankan survey showed on Thursday.

U.S. Treasury yields rose overnight, buoyed by positive U.S. retail data and solid earnings at Wall Street’s banks, pointing to resilience in the world’s largest economy. The benchmark 10-year US10YT=RR yield was last up 1.9 basis points at 1.8074%

Yet, at the long end of the curve in Japan, the 20-year JGB yield fell 1 basis point to 0.300%, as did the 30-year yield, to 0.445%.

“Domestic banks have said that there are still concerns about the economic recovery,” said one market strategist in Tokyo. “Inflation is low and interest rates are not going to rise steadily.” (Reporting by Tom Westbrook in Singapore and Daiki Iga in Tokyo; Editing by Shailesh Kuber)

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