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JGBs at 3-wk high, but gains limited before tankan

TOKYO: June 10-year Japanese government bond futures rallied to their highest level in three weeks on Friday but pulled back from their peak by the close, as active bidding waned ahead of next week's key "tankan" corporate survey.

Japanese pension funds and life insurers were detected buying cash bonds in long-dated maturities, possibly to build up fresh positions in their portfolios for the new fiscal year starting on April 1, traders said.

JGB trades executed on Friday will be settled on April 5.

"Many operators who were overhedged ahead of the tankan data covered their short positions," a Japanese city bank dealer said, noting that many had been speculating on a bullish result in the key corporate sentiment survey due for release on Monday morning.

"But with futures prices rallying sharply recently, short-holders unwound their positions," he said.

June futures: closed at 131.50, up 0.20 point from the Tokyo close on Thursday but pared back from an intraday peak of 131.80, their highest since March 9.

The yield on the 221st 10-year JGB was at 1.780 percent, down 0.010 percentage point from 1.790 on Thursday. The shutdown of a Tiger Management hedge fund will not have a major impact on the JGB market, traders here said, as the operation is thought to have limited exposure to JGBs.

The market briefly drew support in the morning from the announcement of a rise in Japan's jobless rate, but the effect was short-lived as the market looked instead to the tankan, due for release by the Bank of Japan at 8.50 a.m. on Monday (2350 GMT on Sunday), for its next clues on the economy.

Japan's jobless rate rose to a record 4.9 percent in February from 4.7 percent in January, although spending by Japanese wage earners' households in February rose a real 3.8 percent from a year earlier to the highest level in almost three years, providing a mixed picture of the economy.

Looking ahead to the tankan, a Reuters survey produced a median forecast for the major manufacturers' diffusion index of minus 10, an improvement from minus 17 in the previous survey in December. The mean average in the survey also came in at minus 10.

In the short end of the market, money rates moved calmly on the last day of the fiscal year.

TIBOR-based September three-month euroyen futures ended at 99.660, easing from on Thursday's day-session settlement of 99.665.

The key overnight call rate was offered at 0.01 percent, but bidders were sidelined. The weighted average level was 0.02 percent on Thursday.-Reuters