TOKYO:
Japanese government bond futures fell on Monday as dealers locked in profits
after a surge late last week, while the market awaited comments from Bank of
Japan Governor Masaaki Shirakawa for clues about the central bank's policy
path.
JGBs jumped on Friday as
investors rushed to buy paper at higher yields after putting a poor 10-year debt
sale behind them. Roiled by a steep sell-off in late April that sent JGB futures
tumbling to their biggest one-day drop in five years, market players had been
worried about prospects for last Thursday's auction of benchmark 10-year
bonds.
"Some market players are
taking profits following Friday's sharp rally," said a trader at a European
trust bank.
"But bond selling
is not aggressive and the market could easily be turned around by
bargain-hunting that shows investor demand is solid," he
said.
The BOJ's Shirakawa
started delivering a speech at the Japan National Press Center at around 0300
GMT.
The market will pay
attention to his comments after the BOJ late last month dropped its bias towards
raising rates and adopted a more neutral stance, saying it would adjust rates
flexibly.
Swap contracts on the
overnight call rate show investors see a roughly 35 percent chance of the BOJ
boosting rates by the end of the
year.
June 10-year futures slid
0.24 point to 136.36. The lead contract soared 0.80 point on
Friday.
The benchmark 10-year
yield edged up 2 basis points to 1.575 per cent, but stayed well off a
seven-month high of 1.680 per cent struck last
week.
The two-year yield was up
1 basis point at 0.735 per cent, while the five-year yield rose 2 basis points
to 1.140 per cent.
Another of
the market's focal points this week is the Finance Ministry's 1.9 trillion yen
($18.5 billion) five-year debt auction on Thursday, which is seen as a gauge of
investor appetite for government debt after an unusually volatile bond market in
the past two months.
The
five-year notes suffered badly during the bond slump as expectations for a BOJ
rate cut receded, with some in the market even switching their sights towards an
eventual rate rise.
"After the
recent sharp sell-off, the JGB market rebounded, led by gains in the short- and
mid-term sectors," said Akihiko Yokoyama, chief JGB strategist at JPMorgan
Securities. "People are watching whether this trend
persists."
The 20-year yield
edged up 1 basis point to 2.195 per
cent.
DATA
ON RADAR
The MOF will also
offer 200 billion yen in 40-year debt on Tuesday. It will be only the second
auction of bonds in that maturity after the ministry sold 40-year bonds in
November.
Although debt
auctions will remain a focus, investors' attention is expected to shift back to
economic data from the market volatility, analysts and traders
said.
The government will
release a report on March machinery orders on Thursday and data for
January-March growth on
Friday.
The market will also
look to US data this week, including reports on retail sales, consumer prices,
industrial production and housing starts.