FOREX-Yen dips, longs shed on Japan ruling party woes

July 13, 2010 By Leave a Comment

TOKYO, July 12 (Reuters) – The yen eased on Monday after election results showed political uncertainty ahead for Japan, but the move was seen likely to be short-lived with attention turning to the U.S. earnings season as a gauge of risk appetite.

Japan’s ruling coalition, led by Prime Minister Naoto Kan’s Democratic Party of Japan, lost its upper house majority in Sunday’s election, putting Kan’s policies to deal with the country’s massive debt at risk. [ID:nTOE66A02V]

Although the DPJ has a dominant grip on the more powerful lower house, the election makes policy stalemate more likely.

Market players said the outcome helped trigger yen-selling, including likely long liquidation. One trader cited dollar buying against the yen by hedge funds.

Such flows, together with Japanese importer demand for the dollar, helped push the dollar higher against the yen, market players said.

But traders said focal points in the near term were the start of the U.S. earnings season this week and the results of stress test at European banks due later in July, adding that yen-selling pressure stemming solely from the upper house election result was likely to be limited in scope and duration.

“I think we may see a move towards 90 yen to the dollar and that may be it,” said a trader for a Japanese bank, adding that long liquidation in the yen seemed to be the main reason behind the yen’s dip on Monday.

The dollar rose 0.3 percent against the yen to 88.90 yen JPY=, pulling away from a seven-month low of 86.96 yen hit on trading platform EBS in early July.

On daily Ichimoku charts, the dollar faces resistance near 89.55 yen, roughly where the kijun sen now lies.

Overall, the Tokyo market reaction to the election was subdued, with the benchmark Nikkei average .N225 little changed on the day and 10-year Japanese government bond futures eking out a small gain 2JGBv1.

The latest U.S. Commodity Futures Trading Commission (CFTC) data showed that currency speculators increased their long positions in the yen to 37,926 contracts in the week that ended July 6, up from 27,427 contracts in the previous period. [IMM/FX]

The euro was almost flat against the yen at 112.00 yen, having failed to maintain small gains made earlier in the day. EURJPY=R.

Against the dollar, the euro fell 0.3 percent to $1.2598 EUR=. Resistance is seen near $1.2715/20, the trendline from the December high.

The euro touched a two-month high of $1.2723 on Friday, supported by strong German data, some clarity on European bank stress tests and a turnaround in appetite towards riskier assets.

The latest CFTC data showed speculators had decreased bets against the euro to 38,909 contracts, from 73,670 contracts.

Traders said they will watch how a Greek debt auction goes this week for more direction on the euro. The debt-laden country plans to auction six-month treasury bills on July 13.

The dollar index .DXY rose 0.3 percent to 84.225, pulling away from a two-month low of 83.622 hit on Friday. The greenback has been under pressure since early last week, hurt by growing worries about a slowdown in the United States and easing concerns about the euro zone.

“From their June 8 peak, dollar net longs have tumbled by 80 percent,” wrote David Watt, a senior currency strategist at RBC Capital.

“Along the way, the dollar index has dropped from over 88 to below 85. Much of the most recent drop seems due to a successful Spanish bond auction, though yield spreads are working against the dollar and are an underlying factor at play too.”

The U.S. earnings season begins with Alcoa Inc (AA.N) after the closing bell on Monday. Analysts are expecting overall second-quarter earnings to grow by 27 percent, according to Thomson Reuters data. That is up from the 22.4 percent that analysts were anticipating at the beginning of the year.

But given worries about a U.S. slowdown, markets will be looking at companies’ guidance on the coming quarter too, said Katsunori Kitakura, chief dealer at Chuo Mitsui Trust and Co.

“We haven’t had pre-announcement earning revisions, which is a good sign. But depending on the outlook on the third quarter, market sentiment could deteriorate again, which would hurt the dollar,” Kitakura said. [ID:nN08195712]. (Additional reporting by Anirban Nag in Sydney; Charlotte Cooper in Tokyo; Editing by Michael Watson)

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UPDATE 2-China boosting JGB buying amid euro crisis

July 7, 2010 By Leave a Comment

TOKYO, July 6 (Reuters) – China has boosted its buying of Japanese government bonds this year, snapping up a net $6 billion of mostly short-term notes between January and April, double the record amount logged for all of 2005, Japanese finance ministry data showed on Tuesday.

Market players say the purchases do not represent a shift in China’s long-term investment stance but more a short-term move to park funds in yen while sovereign debt concerns buffet the euro.

The euro has sunk more than 14 percent against the dollar this year, reflecting investor concerns over Europe’s debt crisis.

“In general, when overseas central banks cannot hold European sovereign debt it makes sense for them to instead choose JGBs, which have high liquidity,” said Atsushi Ito, a strategist at Morgan Stanley MUFJ Securities Japan.

“We already knew from other data that there has been overseas demand for JGBs with durations of less than a year. Short-term traders might react if China was among the buyers, but the overall impact on the bond market is limited.”

Lead September 10-year Japanese government bond futures were little changed on Tuesday, down 0.07 point at 141.50 2JGBv1.

Analysts say China has been shifting some of its $2.4 trillion in foreign exchange reserves — the world’s largest stockpile — into a wider range of currencies in recent months, including assets elsewhere in Asia and in commodity-producing countries.

Roughly a quarter is estimated to be held in euro-denominated assets, primarily sovereign bonds, analysts say. [ID:nTOE64Q04P]

Of the 541 billion yen ($6 billion) of JGBs purchased by China in the first four months of this year, 517.7 billion yen consisted of debt maturing in less than a year and 23.4 billion yen was in medium- to long-term securities, the ministry data showed.

In April, China bought a net 197.8 billion yen of JGBs, the second-biggest after Britain among foreign buyers, the ministry said. ($1=87.75 Yen) (Additional reporting by Kaori Kaneko; Editing by Michael Watson)

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JGBs slip after rally, curve steeper before auctions

July 6, 2010 By Leave a Comment

TOKYO, July 5 (Reuters) – Japanese government bond futures slipped on Monday, pulling away from a seven-year peak hit the previous week, as market participants sold to hedge their positions ahead of a 10-year debt auction the following day.

JGBs were also capped after U.S. Treasuries fell on Friday as U.S. unemployment numbers were not as bad as had been feared. [US/]

The yield curve steepened as superlongs, which led the previous week’s bull run, also sagged prior to a 30-year sale on Thursday.

“Attention is turning towards the week’s auctions which have finally given the market some selling incentives after last week’s rally,” said Katsutoshi Inadome, a fixed-income strategist at Mitsubishi UFJ Morgan Stanley.

But short-dated notes held firm and euroyen interest rate futures rose after a senior Bank of Japan official told Reuters in an interview that the Tokyo interbank lending rate (Tibor) does not refect real interest rates in the market place.

Haruyuki Toyama, head of the central bank’s financial markets department, also said he hoped banks will set TIBOR, which has been fixed at much higher levels than actual rates in markets, at appropriate levels. [ID:TOE66404C]

JGBs surged the previous week, with the benchmark 10-year yield hitting a seven-year low, as the euro zone’s sovereign debt crisis, hopes for fiscal reform in Japan and the prospect of the global economic recovery losing steam boosted demand for safe-haven debt.

“Selling for the auctions may give the overstretched market a chance to adjust after investors bought long dated debt last week without paying heed to the low yield levels,” Inadome said.

September 10-year futures fell 0.03 point to 141.57 2JGBv1 after hitting a seven-year high of 141.95 the previous week.

They pared some of their losses after the BOJ official’s comments boosted euroyen futures and short-term paper.

The five-year/20-year yield spread widened to 145.5 basis points from 143.5 basis points struck on Friday, the flattest in eight months.

The benchmark 10-year yield JP10YTN=JBTC rose 1 basis point to 1.105 percent, following a decline to a seven-year low of 1.055 percent the previous week.

Focus was on whether domestic banks, which had helped the recent yield curve flattening by buying higher-yielding long-dated JGBs, would continue their purchases at Tuesday’s 10-year sale.

The 30-year yield JP30YTN=JBTC climbed 1.5 basis points to 1.860 percent after touching an 18-month low of 1.795 percent on Friday.

The five-year yield edged up 0.5 basis point to 0.335 percent JP5YTN=JBTC, staying close to a seven-year low of 0.320 percent hit the previous week.

Short to midterm JGB yields have been well anchored amid speculation from some quarters on further easing by the Bank of Japan, market players said, although they contended that the central bank could do little to ease more with rates already at a very low 0.10 percent.

Benchmark March 2011 euroyen interest rate futures rose to as high as 99.695, the highest for a benchmark contract in seven months. JEYv1 (Additional reporting by Hideyuki Sano; Editing by Joseph Radford)

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JGB yield curve flattens as superlongs sought

June 26, 2010 By Leave a Comment

TOKYO, June 25 (Reuters) – The Japanese government bond yield curve flattened on Friday as yields of superlong debt declined on purchases by investors looking for higher returns after a recent rally drove yields of shorter-dated JGBs to multiple-year lows.

Bond futures ended the day flat, coming within striking distance of a two-year high on the back of stumbling Tokyo shares but handing back gains on profit-taking.

JGBs have soared this week as hopes for the government to make good on its vow to rein in debt hastened the decline in yields, which had already been falling this month in the wake of Europe’s sovereign debt crisis and on concerns that the global economic recovery may be losing steam.

The yield curve has bull flattened as investors such as domestic banks, flush with cash due to slow lending and increasing deposits, bought longer-dated notes in search of higher returns.

Traders said some banks’ purchases have extended to superlong debt, adding to bids from traditional investors in the maturities such as pension funds and life insurers.

“In midst of a rally seemingly on track to push the 10-year yield towards 1.1 percent, superlongs are being bought as they are one of the few remaining maturities that still appear relatively cheap,” said a fund manager at a domestic investment firm.

“Banks who had held short positions in the longer-dated maturities at the start of the fiscal year (in April) and pension funds who had not expected such a decline in yields are buying superlongs.”

The benchmark 10-year yield hit a seven-year low of 1.125 percent on Thursday following comments by Prime Minister Naoto Kan last week that the government would consider raising the consumption tax to cut the country’s gigantic public debt.

The five-year/20-year yield spread tightened to 150 basis points on Friday, its flattest in six months.

Many players think the market will remain firmly supported in the near term.

“Many Japanese investors have still not bought as many JGBs as they wanted because the market rally has been unexpectedly fast. They will be ready to buy on any dips,” said Chotaro Morita, head of Japan fixed-income research at Barclays Capital.

September 10-year JGB futures 2JGBv1 were unchanged at 141.06 after hitting 141.18, with profit-taking preventing a test of their June 9 two-year high of 141.19.

The five-year yield JP5YTN=JBTC declined 0.5 basis point to 0.375 percent. Its fall to a seven-year low of 0.365 percent earlier this month has helped move investors further down the curve in search of higher yields.

The 10-year yield was flat at 1.140 percent percent JP10YTN=JBTC.

The 20-year yield JP20YTN=JBTC fell 1.5 basis points to 1.875 percent after touching a 15-month low of 1.865 percent.

The 30-year yield dipped 0.5 basis point to 1.940 percent after hitting a 15-month low of 1.930 percent on Thursday.

Tokyo’s Nikkei average .N225 shed 1.9 percent as fresh signs of weakness in U.S. consumer spending raised concerns about the outlook for corporate earnings. [.T] (Additional reporting by Hideyuki Sano; Editing by Michael Watson)

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Korea T-bond futures selling by foreign investors at 6-mth high

June 23, 2010 By Leave a Comment

June 22 (Reuters) – Selling by foreign investors of front-end government bond futures reached a six-month peak on Tuesday, as they locked in gains in emerging market debt on rising inflationary pressure and tightening currency controls.

Foreign investors dumped a net 13,915 contracts of the September contract KTBc1, marketing their largest single-day selling since Dec. 22, 2009, when they sold a net 21,947 contracts, according to the Korea Exchange. (Reporting by Kim Yeon-hee; Editing by Chris Lewis)

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JGB futures bounce on Nikkei, fiscal framework eyed

June 18, 2010 By Leave a Comment

TOKYO, June 17 (Reuters) – Japanese government bond futures bounced on Thursday, paring losses made the previous day as short positions were covered with the market taking cues from sagging Tokyo stocks and a rise in U.S. Treasuries.

Bond gains were limited as stock losses were relatively shallow, while the JGB market kept its eye on the government’s fiscal strategy framework due next week as Tokyo aims to rein in a public debt nearly twice the size of the country’s GDP.

The yield curve steepened as superlong JGBs lost steam after a solid 20-year auction on Wednesday, while midterm note yields fell on the back of gains by futures.

September 10-year futures 2JGBv1 climbed 0.13 point to 140.41, edging back towards a two-year high of 141.19 struck last week.

While movements in Tokyo have been providing the market with day-to-day incentives, JGBs looked to Europe’s persisting sovereign debt crisis for longer-term support. Some focus was on the raft of European bond auctions, notably from Spain which will sell 2020 and 2041 bonds on Thursday. [ID:nLDE65F1X2]

“JGBs are beginning to look relatively expensive, but growing worries over Europe’s debt problems are anchoring down yields. Unlike stocks, the bond market cannot be as easily convinced that economic conditions are improving,” said Atsushi Ito, a fixed-income strategist at Morgan Stanley MUFG Securities.

The five-year yield JP5YTN=JBTC dropped 1 basis point to 0.400 percent, edging towards a seven-year low of 0.365 percent hit the previous week.

The benchmark 10-year yield JP10YTN=JBTC fell 1 basis point to 1.225 percent. The 20-year yield JP20YTN=JBTC dipped 0.5 basis point to 1.995 percent after an auction of the maturity on Wednesday drew robust investor demand.

The five-year/20-year yield spread widened by 3 basis points to 159.5 basis points.

Midterm JGBs were bought by financial institutions on continuing safe haven flows with concerns over Europe’s fiscal situation persisting, said a trader at a domestic bank.

Yields on shorter-dated maturities have also declined recently with banks buying the midterm sector amid increasing deposits and slack lending. The market focus was on how far down the yield curve such investors were willing to go in search of higher yields.

With most of this month’s debt auctions out of the way, the market turned more of its attention to Japan’s fiscal strategy framework to be finalised by June 22.

New Prime Minister Naoto Kan has vowed to tackle Japan’s huge public debt and the ruling party will leave the door open for an early sales tax rise in its campaign platform for a July poll, media said on Thursday, a shift from its focus on spending in last year’s pledges. [ID:nTOE65909A] [ID:nLDE65G020]

Market players said such a fiscally prudent stance, would be welcomed by bond investors, although they also warned of potential repercussions if the pledge fell short of expectations.

“Any (market) reaction to the actual plans could be temporary. Tax hikes often don’t proceed as planned. Expectations towards fiscal restructuring are there because a new prime minister came into office, but such expectations may be dented once tax hike plans run into difficulties,” said Koichi Ono, a senior market strategist at Daiwa Securities Capital Markets.

The Nikkei average .N225 slipped 0.7 percent after mixed U.S. economic data underscored an uneven economic recovery and weighed on exporters. [.T]

U.S. Treasuries rose on Wednesday after data showed housing starts in May slumped to a five-month low, suggesting that the economy’s recovery remains tentative. [US/] (Editing by Joseph Radford)

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EURO GOVT-Bonds open lower ahead of supply

June 17, 2010 By Leave a Comment

June 16 (Reuters) – German bond futures opened lower on Wednesday, after strong gains by U.S. equities overnight and weighed down ahead of a 10-year Bund auction this session. Germany will issue 5 billion euros of 10-year Bunds, the euro zone’s benchmark issue.

European equities .FTEU3 were expected to open higher at 0700 GMT, feeding off Wall Street’s gains .GSPC.

Although German Bund yields are 20 basis points higher than when they set a record low of 2.497 on June 8, one trader said more concession-building was likely ahead of the auction if Bund futures remained lower.

Bids for the auction close at 0900 GMT.

“The main focus today is the Bund auction and equities, and there is room for more cheapening off in the Bund leading up to the tender,” he said. At 0606 GMT, the September Bund future FGBLc1 was down 29 ticks at 128.01.

The two-year Schatz yield DE2YT=TWEB was up 1.5 basis points at 0.529 percent while the 10-year Bund yield DE10YT=TWEB was up 2.4 bps at 2.703 percent.

In data, euro zone final consumer prices for May are due at 0900 GMT but unlikely to turn heads unless they are revised. The market forecast is for a gain of 1.6 percent in the headline year-on-year figure.

(Reporting by George Matlock; editing by John Stonestreet)

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JGBs inch up; little impact from political turmoil

May 31, 2010 By Leave a Comment

May 31 (Reuters) – Lead 10-year Japanese government bond futures inched higher on Monday, taking in their stride the Social Democratic Party’s (SDP) decision the previous day to leave Japan’s ruling coalition.

Bonds

* The departure of the tiny SDP is a blow to Prime Minister Yukio Hatoyama, already seen by voters as a weak leader, damaging his Democratic Party’s chances of winning a majority in an upper house election expected in July, which it needs to pass bills smoothly. [ID:nSGE64T00L]

* Any factors that erode the ruling coalition’s political clout or lead to a decline in Hatoyama’s popularity can be regarded as negative for JGBs as they may raise doubts about the willingness of ruling parties to tackle fiscal consolidation measures, analysts say.

* “This piece of news is not something that is necessarily positive for yen bonds, especially super-long bonds,” said Makoto Yamashita, chief Japan interest rate strategist for Deutsche Securities.

* But given that Hatoyama’s popularity has already been in a declining trend, the news of the SDP leaving the ruling coalition is unlikely to have much additional impact on JGBs, Yamashita said.

* Lead June 10-year JGB futures rose 0.11 point to 140.56 2JGBv1, edging back towards a two-year peak of 140.88 hit last week.

* The benchmark 10-year JGB yield dipped 0.5 basis point to 1.245 percent JP10YTN=JBTC. The 10-year yield fell as low as 1.190 percent last week, matching a low last touched in December.

* One supportive factor for JGBs in the near term is the potential for cash bond buying by passive-strategy investors looking to extend durations on their portfolios at the month-end to match moves in benchmark bond indexes, Yamashita said.

* But with a 10-year JGB auction looming on Tuesday, investors other than such index-following players are unlikely to bid very aggressively for longer-term cash JGBs, he said. (Reporting by Masayuki Kitano; Editing by Chris Gallagher)

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Brown eases Labour pains, will resign

May 11, 2010 By Leave a Comment

British Prime Minister Gordon Brown said on Monday he would step aside this year, sacrificing himself to try to give his Labour Party a chance of forming a government with the smaller Liberal Democrats.

The Conservatives have been talking to the Liberal Democrats to try to form a government, but Brown said in a dramatic statement delivered in front of his official residence at 10 Downing Street the Lib Dems also wanted to talk to Labour.

The Conservatives, led by David Cameron, won most seats in parliament but fell short of a majority after an inconclusive election last week. Labour came second and the smaller Liberal Democrats, led by Nick Clegg, a distant third.

“Mr Clegg has just informed me that while he intends to continue his dialogue that he has begun with the Conservatives, he now wishes also to take forward formal discussions with the Labour Party,” Brown said, adding that he would facilitate those talks.

“I have no desire to stay in my position longer than is needed to ensure the path to economic growth is assured and the process of political reform we have agreed moves forward quickly,” he said.

“As leader of my party, I must accept that that is a judgment on me. I therefore intend to ask the Labour Party to set in train the processes needed for its own leadership election,” he said. Brown did not give a precise timeframe for his departure, but said he hoped it would be done by the time of the Labour Party conference, which is scheduled for late September.

Britain’s sterling currency fell and government bond futures hit a session low after Brown’s comments. Markets had been hoping for a quick deal between the Conservatives and Lib Dems and will not relish the prospect of further delays as parallel talks take place between the Lib Dems and Labour.

Earlier, Liberal Democrat legislators said they were seeking clarification from the party’s negotiators about details of a possible deal with the Conservatives.

“Although we are very, very conscious of the need to make these decisions quickly… we also want to make sure that we get these matters right,” said Lib Dem legislator David Laws.

Conservative and Lib Dem negotiators said earlier they made progress at talks to reach a power-sharing deal, although others called for caution on how quickly a deal could be clinched.

Foreign Secretary David Miliband and Education Secretary Ed Balls will likely be leading contenders to succeed Brown.

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JGBs climb on Treasuries, rising stocks cap gains

April 15, 2010 By Leave a Comment

TOKYO, April 14 (Reuters) – Japanese government bond futures climbed on Wednesday, boosted by a rise in longer-dated U.S. Treasuries the previous day and by buying from cross-asset traders.

Gains in futures helped five-year notes, to which they are more closely linked than other maturities, steepening the yield curve a little.

But the advance in JGBs was limited as investors were hesitant to chase prices higher, with Tokyo’s Nikkei stock average .N225 up 0.4 percent, moving back towards 18-month highs. [.T]

“Overseas players are buying back futures, providing support for cash bonds,” said Hidenori Suezawa, chief strategist at Nikko Cordial Securities.

“Meanwhile, Japanese investors are sticking to their bargain-hunting stance.”

Traders said overseas players who were active on Wednesday included commodity trading advisers (CTAs) and hedge funds.

June 10-year JGB futures 2JGBv1 gained 0.13 point to 138.73.

The rise in futures was also capped ahead of an auction of five-year debt on Thursday.

Five-year JGBs have traditionally met with demand from cash rich Japanese banks, but dealers were wary of pushing prices too high before the auction and dampening the new paper’s appeal, market players said.

The five-year yield JP5YTN=JBTC was unchanged at 0.530 percent.

The benchmark 10-year yield JP10YTN=JBTC slipped 1 basis point to 1.360 percent, having fallen from a five-month peak of 1.405 percent marked last week.

The firmness in the long-end helped the yield curve bull steepen — when yields of shorter-dated debt decline more relative to longer-dated ones.

The 30-year yield JP30YTN=JBTC inched up 1 basis point to 2.230 percent a day after a re-opening of the No. 32 30-year JGB drew tepid demand as the maturity was regarded as expensive following a recent bull run. The yield struck a four-month trough of 2.200 percent last week.

The 10-year/30-year yield spread widened 2 basis points to 86.5 basis points after marking a five-month low below 83 basis points on Tuesday, the culmination of a flattening phase that began a month ago.

“The flattening of the curve looks to be at an end if current market sentiment holds. But underlying demand exists from a variety of investors, so a rise in superlong yields could lead to a buying phase as we saw last month,” said Kenro Kawano, a fixed-income strategist at Credit Suisse.

Japan’s life insurers, one of the main buyers of superlong debt, have said they want to increase holdings of these maturities if yields rise. [JP/INS]

Longer-dated Treasuries rose on Tuesday as investors awaited an inflation report and testimony by Fed Chairman Ben Bernanke on Wednesday, both of which are expected to paint a cloudy picture of the economy. [US/] (Additional reporting by Shinichi Saoshiro; Editing by Joseph Radford)

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JGB futures slip, positions trimmed as Nikkei rises

April 12, 2010 By Leave a Comment

(Reuters) – Japanese government bond futures slipped on Monday as participants trimmed their positions on a rise in Tokyo shares and ahead of an upcoming 30-year debt auction.

Japan

Midterm JGBs held relatively firm, as bargain hunting from banks flush with cash prevented yields from rising sharply.

Japan’s Ministry of Finance will sell 600 billion yen ($6.4 billion) of 30-year JGBs on Tuesday, and participants expect strong underlying demand from insurers to help the market digest the supply.

The auction is taking place after the 30-year yield recently declined to a four-month low on demand at the start of the fiscal year that began on April 1 from domestic investors such as pension funds and life insurers.

“Concern about the auction is limited as actual investor demand has driven superlong yields down to these levels so far,” said Makoto Yamashita, chief Japan interest rate strategist at Deutsche Securities.

“But a superlong rally we have seen this fiscal year may begin tapering off as the market will need time to digest the 30-year bonds.”

The 30-year yield edged up 0.5 basis point to 2.220 percent after hitting a four-month low of 2.200 percent on Friday.

The benchmark 10-year yield climbed 1.5 basis points to 1.395 percent.

The five-year yield rose 0.5 basis point to 0.545 percent. The yield has declined more than 30 basis points over the past year, helped in part by purchases from domestic banks looking for a place to park their cash amid rising deposits and slack lending.

Data released on Monday showed outstanding loans held by Japanese banks fell 1.8 percent in March from a year earlier, the most in more than four years, as companies remained reluctant to borrow in order to boost capital spending.

The minutes of the Bank of Japan’s March 16-17 policy meeting showed that some policy board members said additional monetary easing would be inappropriate as the economy is picking up in line with forecasts. At the meeting, the BOJ eased monetary policy by doubling the size of its cheap fund-supply adopted in December.

The minutes, released on Monday, were in focus as the BOJ had reached its easing decision in March after a split vote which had dented prospects for further monetary policy loosening.

The BOJ did not engage in further easing at its latest policy meeting the previous week, while it tweaked its assessment to say the economy “continued” to pick up. The benchmark 10-year JGB yield hit a five-month high after upbeat comments on the economy from Governor Masaaki Shirakawa cooled expectations of easing in coming months.

June 10-year futures fell 0.19 point to 138.21.

Tokyo’s Nikkei stock average .N225 gained 1 percent after the Dow surpassed 11,000 for the first time in a year-and-a-half on Friday on the latest data reinforcing bets on an improving economy.

(Reporting by Shinichi Saoshiro; Editing by Joseph Radford)

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JGB futures slip, positions trimmed as Nikkei rises

April 12, 2010 By Leave a Comment

TOKYO, April 12 (Reuters) – Japanese government bond futures slipped on Monday as participants trimmed their positions on a rise in Tokyo shares and ahead of an upcoming 30-year debt auction.

Midterm JGBs held relatively firm, as bargain hunting from banks flush with cash prevented yields from rising sharply.

Japan’s Ministry of Finance will sell 600 billion yen ($6.4 billion) of 30-year JGBs on Tuesday, and participants expect strong underlying demand from insurers to help the market digest the supply.

The auction is taking place after the 30-year yield recently declined to a four-month low on demand at the start of the fiscal year that began on April 1 from domestic investors such as pension funds and life insurers.

“Concern about the auction is limited as actual investor demand has driven superlong yields down to these levels so far,” said Makoto Yamashita, chief Japan interest rate strategist at Deutsche Securities.

“But a superlong rally we have seen this fiscal year may begin tapering off as the market will need time to digest the 30-year bonds.”

The 30-year yield JP30YTN=JBTC edged up 0.5 basis point to 2.220 percent after hitting a four-month low of 2.200 percent on Friday.

The benchmark 10-year yield JP10YTN=JBTC climbed 1.5 basis points to 1.395 percent.

The five-year yield JP5YTN=JBTC rose 0.5 basis point to 0.545 percent. The yield has declined more than 30 basis points over the past year, helped in part by purchases from domestic banks looking for a place to park their cash amid rising deposits and slack lending.

Data released on Monday showed outstanding loans held by Japanese banks fell 1.8 percent in March from a year earlier, the most in more than four years, as companies remained reluctant to borrow in order to boost capital spending. [ID:nEAP001468]

The minutes of the Bank of Japan’s March 16-17 policy meeting showed that some policy board members said additional monetary easing would be inappropriate as the economy is picking up in line with forecasts. At the meeting, the BOJ eased monetary policy by doubling the size of its cheap fund-supply adopted in December. [ID:nTKB006789]

The minutes, released on Monday, were in focus as the BOJ had reached its easing decision in March after a split vote which had dented prospects for further monetary policy loosening.

The BOJ did not engage in further easing at its latest policy meeting the previous week, while it tweaked its assessment to say the economy “continued” to pick up. The benchmark 10-year JGB yield hit a five-month high after upbeat comments on the economy from Governor Masaaki Shirakawa cooled expectations of easing in coming months.

June 10-year futures 2JGBv1 fell 0.19 point to 138.21.

Tokyo’s Nikkei stock average .N225 gained 1 percent after the Dow surpassed 11,000 for the first time in a year-and-a-half on Friday on the latest data reinforcing bets on an improving economy. [.T] [ID:nN09141748] (Reporting by Shinichi Saoshiro; Editing by Joseph Radford)

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JGB futures dip, positions trimmed as Nikkei rises

April 12, 2010 By Leave a Comment

TOKYO, April 12 (Reuters) – Japanese government bond futures inched down on Monday as participants trimmed their positions in response to a rise in Tokyo shares and ahead of an upcoming 30-year debt auction.

Bonds

* Japan’s Ministry of Finance will sell 600 billion yen ($6.4 billion) of 30-year JGBs on Tuesday. Participants expect strong underlying demand from insurers to help the market digest the supply.

* June 10-year futures 2JGBv1 fell 0.10 point to 138.30.

* Tokyo’s Nikkei stock average .N225 gained 1.3 percent after the Dow surpassed 11,000 for the first time in a year-and-a-half on Friday on the latest data reinforcing bets on an improving economy. [.T] [ID:nN09141748]

* The minutes of the Bank of Japan’s March 16-17 policy meeting showed that some policy board members said additional monetary easing would be inappropriate as the economy is picking up in line with forecasts. At the meeting, the BOJ eased monetary policy by doubling the size of its cheap fund-supply adopted in December. [ID:nTKB006789]

* The BOJ did not engage in further monetary policy easing at its latest policy meeting the previous week, while it tweaked its assessment to say the economy “continued” to pick up. The benchmark 10-year JGB yield hit a five-month high after upbeat comments on the economy from Governor Masaaki Shirakawa cooled expectations the central bank would further ease policy in coming months.

* The five-year yield JP5YTN=JBTC was unchanged at 0.540 percent. The yield has declined more than 30 basis points over the past year, helped in part by purchases from domestic banks looking for a place to park their cash amid rising deposits and slack lending.

* Data released on Monday showed outstanding loans held by Japanese banks fell 1.8 percent in March from a year earlier, the most in more than four years, as companies remained reluctant to borrow in order to boost capital spending. [ID:nEAP001468] (Reporting by Shinichi Saoshiro; Editing by Joseph Radford)

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JGB futures dip on Treasuries, MOF meeting awaited

April 20, 2009 By Leave a Comment

Losses in U.S. Treasuries hurt JGBs

* Dealers want extra debt supply spread across curve

* MOF meeting with investors on Monday in focus

By Rika Otsuka

TOKYO, April 20 (Reuters) – Japanese government bond futures edged down on Monday in subdued trade as traders took their cue from losses in U.S. Treasuries late last week, while investors awaited a meeting with the Ministry of Finance later in the day.

The MOF heard from primary dealers at a meeting on smooth absorption of increased JGB issuance on Friday that they want extra debt to be spread across all maturities.

The MOF will hold a similar meeting with investors on Monday. [ID:nT323371]

“JGBs were dented by a drop in Treasuries,” said Chotaro Morita, chief fixed-income strategist for Japan at Barclays Capital.

“Thanks to a recovery in global shares in the past month, investors are not in a hurry to pick up bonds. They are using supply jitters as an excuse to take a wait-and-see stance in the bond market,” Morita said.

June futures dipped 0.11 point to 136.70 2JGBv1. The lead futures contract hit a 5-1/2-month low of 136.43 on April 9 on worries about the surge in debt issuance.

The benchmark 10-year yield rose 1.5 basis points to 1.460 percent.

The government announced a record stimulus package earlier this month with fiscal spending of 15.4 trillion yen ($155 billion) to tackle Japan’s worst recession since World War Two.

It will issue over 10 trillion yen of bonds to finance the package.

The five-year yield rose 1.5 basis points to 0.850 percent.

The MOF said after Friday’s meeting that primary dealers thought 1-, 2- and 5-year maturities could absorb an extra 300 billion to 400 billion yen of supply per auction.

Dealers also thought 10- and 20-year maturities could absorb an additional 200 billion yen per auction, and 30- and 40-year JGBs could take an extra 100 billion per sale, the MOF said.

Market participants will pay attention to the outcome of the MOF’s meeting with investors on Monday as they are keen to know investors’ views on how maturities of the extra debt should be spread.

“The increase in JGB issuance is likely to make the yield curve steepen despite the bigger boosts in shorter-dated notes,” said Tetsuya Miura, a bond strategist at Shinko Securities.

“That is because of a much larger number of players in the short- and mid-term sectors than the long-end, as well as the Bank of Japan’s low interest rate policy,” Miura said.

The 20-year yield was up 1.5 basis points at 2.135 percent.

The yield spread between two- and 20-year bonds struck a three-year high of 173.5 basis points on Friday as supply concerns have lifted longer-dated yields more.

Two-year bonds were untraded by midday. The 2-year yield was 0.395 percent in late trade on Friday.

U.S. Treasuries tumbled on Friday, pushing benchmark yields to the highest in a month, as strength in the stock market undermined any safety bid for bonds. [US/] ($1=99.31 Yen) (Editing by Joseph Radford)

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Treasury Bond Daily Commentary for 4.16.09

April 18, 2009 By Leave a Comment

The 30 Year T-Bond futures are topping out again despite a lack of significant movement from U. S. equities. The 30 Year is obeying its downtrend, and its decline could be a cause for concern if there isn’t a counterbalancing rally in the S and P futures.

We still haven’t seen that follow through to the upside in either the 30 or 10 Year futures after March’s furious rally.

Therefore, even though the Fed has already purchased over $50 Billion worth of government debt, the level of quantitative easing combined with normal investor purchase of debt may not be sufficient to counter to the massive supply required for America’s economic stimulus package.

The movement, or lack thereof, in the 30 Year futures is certainly discouraging, and could soon ignite fear that the amount of quantitative easing may need to be increased.

That being said, the 30 Year futures are clearly locked into their downtrend and would need a large reversal to the upside to alter their path.

Fundamentally, we find resistances of 127.28, 127.64, 127.89, 128.31, and 128.73. To the downside, we hold our supports of 127.04 126.69, 126.27, and 125.90 with fresh bottom-end of 125.5. The 30 Year T-Bond futures are presently trading at 127 02.5.

Treasury Bond Daily Commentary for 4.16.09

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Disclaimer: For information purposes only. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. There is a substantial risk of loss in trading futures and foreign exchange.

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Treasury Bond Daily Commentary for 4.14.09

April 16, 2009 By Leave a Comment

The 30 Year T-Bond futures are perking up pre-market on Tuesday after America’s economic data disappointed. As a result, the 30 Year futures are flexing their negative correlation with U. S. equities.

Though the 30 Year futures have bounced from our 1st tier downtrend line, they haven’t made any game-changing moves to awaken from the depths of their present downtrend.

The lack of follow through to the upside paints a distorted picture. On one hand, we could be witnessing insufficient demand in the bond market to compensate for the massive supply of treasuries created to fund the government’s stimulus measures despite the Fed’s use of quantitative easing.

On the other hand, the 30 Year’s reluctance to the upside bolsters the argument for a recovery in U. S. equities, and consequently America’s economy.

With a lack of evidence it’s difficult to commit to one argument or the other, showing the 30 Year futures may be a lagging indicator right now. That being said, the 30 Year futures should continue their positive correlation with U. S. equities while remaining in a negative stance.

Fundamentally, we hold our resistances of 127.28, 127.64, 127.89, and 128.31 with fresh top-end of 128.73. To the downside, we find supports of 127.04 126.69, 126.45, 126.19, and 125.91. The 30 Year T-Bond futures are presently trading at 127 05.5.

Treasury Bond Daily Commentary for 4.14.09

Copyright 2009 FastBrokers, Latest Forex News and Analysis for Forex, Bullion and Commodity Traders.

Disclaimer: For information purposes only. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. There is a substantial risk of loss in trading futures and foreign exchange.

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Treasury Bond Daily Commentary for 4.8.09

April 8, 2009 By Leave a Comment

The 30 Year T-Bond futures logged only modest gains despite yesterday’s broad selloff in U. S. equities. The 30 Year futures are following our downtrend to a tee, indicating they are still gravitating towards the downside.

Therefore, the 30 Year futures could be transmitting the same message as gold in that the present selloff in U. S. equities is only temporary. On the other hand, the selloff in the 30 Year futures could be disconcerting in the fact that the movement represents disinterest in the massive treasury auctions taking place to fund America’s economic initiatives.

As a result, the downward movement in the 30 Year futures could indicate an insufficient impact from the Fed’s use of quantitative easing due to booming supply and waning demand. We can’t forget March 18th’s historical rise in reaction to the Fed’s announcement of quantitative easing, and we wouldn’t be surprised to see high volatility return to the 30 Year futures shortly.

However, before we tread too far down the speculative path, we will take the current downturn in the 30 Year futures as a normal negative correlation with U. S. equities. The trend in the 30 Year futures remains to the downside barring a significant fundamental reversal.

Fundamentally, we hold our resistances of 127.05, 127.28, 127.64, 127.89, and 128.31. To the downside, we maintain our supports of 126.69, 126.45, 126.19, 125.91, and 125.47. The 30 Year T-Bond futures are presently trading at 126 31.5.

Treasury Bond Daily Commentary for 4.8.09

Copyright 2009 FastBrokers, Latest Forex News and Analysis for Forex, Bullion and Commodity Traders.

Disclaimer: For information purposes only. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. There is a substantial risk of loss in trading futures and foreign exchange.

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S and P Daily Commentary for 4.8.09

April 8, 2009 By Leave a Comment

The S and P futures continued their selloff yesterday as well-regarded economists, including Dallas Fed’s Fisher, flooded the wires with negative outlooks concerning the health of the economy and solvency of banks. Although the present pullback has been brisk, it hasn’t been supported by high volume or U. S. economic data. Regardless, the selloff has taken the wind out of the rally’s sails.

The S and P futures went as far as to dip below our 1st tier trend line. However, investors will need very negative news on the earnings or data front to send the futures back below the critical 800 level.

That being said, the rally in the S and P futures has been disappointing by failing to eclipse our 3rd tier downtrend line and February highs. As a result, the futures are creating the possibility of a return to the devastating downtrend of the economic crisis. Focus will remain on corporate earnings until Thursday’s trade balance and unemployment claims release.

On a positive note, economic data releases are showing signs of improvement in Britain and the EU, adding to speculation that the economic crisis is subsiding. Conversely, Japan’s economy continues to unravel with no signs of a bottom.

Correlation wise, crude futures have crashed below our 1st tier uptrend line and the highly psychological $50/bbl. Since crude and equities have been tightly correlated, the deterioration taking place in the fundamentals of crude futures are a bit concerning. On the other hand, gold and the 30 Year T-Bond futures continue tier respective lines. Therefore, the S and P’s correlations are painting a mixed picture, highlighting the uncertainty prevalent in the markets right now.

Pushing the distortion aside, everybody’s asking the same question: `Is the economic crisis really over?’ While economic data points in the U. S., EU, and Britain are showing signs of stabilization, they could easily be a pop up on the way down.

Therefore, investors are on guard to see if the all around rally can materialize into something more than a bear market rally. Fundamentally, we find supports of 815, 809.25, 804.75, 799.75, and 794. To the topside, we see resistances of 821.5, 829.5, 834.75, 840.25, and 845.25. The S and P futures are currently trading at 816.50.

Copyright 2009 FastBrokers, Latest Forex News and Analysis for Forex, Bullion and Commodity Traders.

Disclaimer: For information purposes only. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. There is a substantial risk of loss in trading futures and foreign exchange.

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Treasury Bond Daily Commentary for 4.7.09

April 8, 2009 By Leave a Comment

The 30 Year T-Bond futures have failed to climb back above our downtrend line and March 26 lows despite weakness in U. S. equities. Therefore, the 30 Year futures could be transmitting the same message as gold in that the present selloff in U. S. equities is only temporary.

On the other hand, the selloff in the 30 Year futures could be disconcerting in the fact that the movement represents disinterest in the massive treasury auctions taking place to fund America’s economic initiatives.

As a result, the downward movement in the 30 Year futures could indicate an insufficient impact from the Fed’s use of quantitative easing due to booming supply and waning demand.

We can’t forget March 18th’s historical rise in reaction to the Fed’s announcement of quantitative easing, and we wouldn’t be surprised to see high volatility return to the 30 Year futures shortly.

However, before we tread too far down the speculative path, we will take the current downturn in the 30 Year futures as a normal negative correlation with U. S. equities.

The trend in the 30 Year futures remains to the downside barring a significant fundamental reversal. Fundamentally, we find resistances of 127.05, 127.28, 127.64, 127.89, and 128.31.

To the downside, we see supports of 126.69, 126.45, 126.19, 125.91, and 125.47. The 30 Year T-Bond futures are presently trading at 126 24.0.

Treasury Bond Daily Commentary for 4.7.09

Copyright 2009 FastBrokers, Latest Forex News and Analysis for Forex, Bullion and Commodity Traders.

Disclaimer: For information purposes only. FastBrokers assumes no responsibility or liability from gains or losses incurred by the information herein contained. There is a substantial risk of loss in trading futures and foreign exchange.

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Treasury Bond Daily Commentary for 4.6.09

April 7, 2009 By Leave a Comment

The 30 Year T-Bond futures tumbled back below our downtrend line on Friday as the S and P futures continued their upward momentum. The movement was a strong reversal and the 30 Year futures dipped below March 24 lows.

The futures are recovering Monday morning and are trading right at our downtrend line in reaction to the S and P futures pointing towards a lower open in U. S. equities.

The 30 Year futures continue to show an inclination towards the downtrend since March 18th’s historical surge. The weakness in the futures is a bit disconcerting since the Fed’s implementation of quantitative easing was supposed satisfy the rising supply and buoy interest rates to keep U. S. debt attractive.

Therefore, investors should keep a close eye on the 30 Year futures since the use of quantitative easing is unprecedented in U. S. history and its ramifications on the value of the 30 Year is unknown.

That being said, we expect to see the high volatility continue while the 30 Year futures lock into their positive correlation with the S and P futures.

Fundamentally, we find resistances of 127.55, 127.83, 128.19, and 128.61. To the downside, we hold our supports of 126.98, 126.69, 126.45, and 126.19. The 30 Year T-Bond futures are presently trading at 127 20.0.

Treasury Bond Daily Commentary for 4.6.09

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