TOKYO (XFN-ASIA) - Japanese government bond prices ended the morning session higher as institutional investors came in to hunt for bargains following yesterday’s steep falls following the release of surprisingly strong industrial output data, dealers said.
“Apparently yesterday’s rather steep falls provided a good opportunity for institutional investors who had been waiting to buy bonds cheaply,” Okasan Securities strategist Akitsugu Bando said.
At the break, the yield on the benchmark 10-year bond was at 1.665 pct, down from 1.680 pct at the close yesterday.
The yield on the lead five-year debt fell to 1.205 pct from 1.225 pct and the yield on the two-year debt slipped to 0.820 pct from 0.830 pct.
The yield on the bellwether 20-year bond dropped to 2.125 pct from 2.145 pct, while the yield on the 30-year bond eased to 2.3655 pct from 2.360 pct. Bond prices move inversely to yields.
The price of the 10-year bond futures contract had risen to 134.96 yen from 134.75 yen in late trading yesterday.
Dealers said despite the gains this morning, the JGB market looked top-heavy as investors turned wary ahead of the release tomorrow morning of the nationwide core consumer price index for October, which is being closely watched because of
its possible implications to near-term monetary policy.
Market interest in the CPI outcome has also been growing stronger after yesterday’s strong industrial output data for October rekindled talk of the possibility of a rate increase sooner rather than later, they said.
Government preliminary data showed that production at factories and mines rose a seasonally adjusted 1.6 pct month-on-month last month, bringing the industrial output index to 107.8, the highest on record.
The market was expecting a month-on-month fall of 0.4 pct while the government had been looking at a decline of 0.2 pct.
“But unless any forthcoming data provide compelling evidence that the Bank of Japan needs to make more rate hikes beyond the next increase, institutional investors will continue to show strong interest in buying the 10-year notes if the yield comes close to the 1.7 pct level,” Bando said.