20000411

JGBs mixed, 20-yr bonds rally despite stocks' rise

TOKYO: Key June 10-year Japanese government bond futures and 10-year bonds slipped on Monday due to a surge in Tokyo share prices, but 20-year JGBs were undeterred and extended last week's gains.

Besides a 366-point rise in the Nikkei average, dealers said JGB futures were hurt by talk that Moody's Investors Service may announce a downgrade of JGBs in the near future.

"It has been a couple of months since Moody's put Japan's rating on review for possible downgrade, and there was talk that an actual downgrade may be announced soon," said a fund manager for a foreign investment trust.

Moody's put the Japanese government's Aa1-rated domestic currency rating on review for possible downgrade on February 17.

Despite such talk, 20-year JGBs were higher due to buying by dealers following a flurry of buying by investors last week.

"It is said that a certain domestic life insurer has been bidding aggressively for the 20-year JGBs recently," a trust bank trader said.

Key June 10-year JGB futures: ended at 131.89, down from on Friday's close of 132.19. Turnover was a moderate 29,873 lots.

The yield on the 221st 10-year JGBs stood at 1.740 percent, up from 1.720 percent late on Friday.

The yield on the 46th 20-year JGBs stood at 2.080 percent, down from 2.110 percent late on Friday.

JGBs shrugged off a 2.5 percent month-on-month fall in core private-sector machinery orders as well as a 0.1 percent year-on-year rise in the domestic wholesale price index for March, which the Bank of Japan said was the first year-on-year rise since February 1998.

The fall in machinery orders was expected after an unexpected 0.8 percent rise in January and a stunning 16.1 percent in December and had only a limited impact on JGBs, analysts said.

In the near term, analysts said, JGBs are likely to be supported ahead of a meeting of Group of Seven finance ministers on April 15, since Japan is expected to state its intention at the meeting to maintain the BOJ's zero rate policy for a while longer.

The BOJ said after the close of JGB futures trading that its Policy Board decided by majority vote on Monday to keep its zero interest rate policy unchanged. -Reuters