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JGBs rise on growth concerns, futures lead gains
September 26, 2012 / 2:21 AM / 5 years ago

JGBs rise on growth concerns, futures lead gains

TOKYO, Sept 26 (Reuters) - Japanese government bond prices rose on Wednesday, with futures leading the gain while cash bond trading was subdued with many investors on sidelines ahead of their half-year book-closing at the end of the month.

* The benchmark 10-year JGB futures rose 0.12 point to 144.08, near resistance at 144.12, the 61.8 percent retracement of their decline in July and August.

* JGBs gained after U.S. Treasuries rose and Wall Street shares slid as investors remained unconvinced whether stimulus measures by major central banks could lift the moribund global economy.

* “In the grand scheme of things, the key for the market is whether the global economy will pick up after stimulus by the Fed and bond buying plan by the European Central Bank, or if we will see further economic downturn,” said Naomi Muguruma, senior strategist at Mitsubishi UFJ Morgan Stanley Securities.

* On top of global slowdown, strains in Sino-Japanese diplomatic relations are another headache as Japanese carmakers curtail production in China following anti-Japan protests in China.

* The yield on current 10-year cash bonds fell 1.5 basis point to 0.780 percent, its lowest level in three weeks.

* While trading in cash bonds was slow due to the financial half-year end on Sept 30, expectations of month-end buying by pension funds provided some support.

* Some market players said buying in JGBs might have been curbed by caution ahead of Wednesday’s leadership election of the opposition Liberal Democratic Party (LDP), which is likely to return to power after an election, expected later this year at the earliest.

* While the implications of the leadership contest could be complicated, many think the risk to JGBs would be greatest if former Prime Minister Shinzo Abe was elected because of his opposition to a tax hike plan the LDP and Prime Minister Yoshihiko Noda agreed earlier this year.

* The race was seen as too close to call between the main three contenders including Abe, former defence minister Shigeru Ishiba and the party’s secretary-general Nobuteru Ishihara. The voting is expected to start around 1:00 p.m. (0400 GMT).

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