January 15, 2013 / 1:26 AM / 5 years ago

JGB market sentiment improves but still bearish - Reuters survey

TOKYO, Jan 15 (Reuters) - A weekly gauge of sentiment in the Japanese government bond market improved in the latest week, supported by expectations of more easing steps by the Bank of Japan, but remained solidly in negative territory, the latest Reuters poll showed on Tuesday.

The poll’s JGB bull-bear diffusion index, calculated by subtracting the number of bearish market players from those who are bullish, came in at minus 23, improving from minus 54 in the previous survey, which was its lowest reading since the July 2 poll.

The median forecast for the benchmark 10-year JGB yield at the end of this week came in at 0.820 percent, below last week’s forecast of 0.850 percent, though 1 basis point above Friday’s closing level of 0.810 percent .

The 10-year yield skidded 2 basis points to 0.790 percent on Tuesday morning, its lowest since Dec. 27. The benchmark 10-year JGB futures contract was up 0.28 point at 144.03.

The survey found that 42.9 percent of respondents expect yields to trade sideways this week, up from 20.5 percent in the previous poll, while 40.0 percent expect JGB yields to rise, down from 66.7 percent.

Some 17.1 percent expect them to fall this week, up from 12.8 percent in the previous survey.

Longer maturities have been pressured by worries Japan’s new government headed by Prime Minister Shinzo Abe will increase issuance to fund massive fiscal stimulus in a bid to end deflation. But expectations of easier monetary policy have supported the shorter- and medium maturities, even as the yen plunged and Japanese equities markets soared in recent weeks.

The BOJ will consider easing monetary policy again at its Jan. 21-22 meeting, likely by increasing its 101 trillion yen asset buying and lending programme, according to sources familiar with the central bank’s thinking.

The online survey of 97 JGB market participants from major institutions received 35 responses, for a response rate of 36.1 percent. These included 17 “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 Tuesday (2300 GMT on Monday). Monday was a holiday in Japan. (Reporting by Yoshiyasu Shida; Writing by Lisa Twaronite; Editing by Jacqueline Wong)

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