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JGB off highs after rapid gain, mood still upbeat

TOKYO: March 10-year Japanese government bond (JGB) futures ended on Tuesday trade firmer but off a seven-month high of 134.13 hit earlier as corrective sales set in after a gain of more than a full point since Friday's close.

"Sentiment is still pretty bullish though. It's just that the rise was so quick. So even a correction of 0.5 point wouldn't surprise anyone now," said a dealer at a life insurance company.

Cash bonds were also holding firmer, but with the yield of the 219th 10-year cash bonds dropping as low as 1.620 percent earlier, the market turned cautious about bidding JGBs further as the lower yield could push down the coupon rate at the auction and limit demand, traders said.

March futures ended on Tuesday trade at 133.93, up 0.23 from Monday.

The yield on the 219th 10-year cash JGB was is at 1.625 percent, compared with on Monday's 1.660 percent.

An initial rally in the bond market was spurred by the Group of Seven's call for the Bank of Japan (BOJ) to maintain its zero interest-rate policy at its weekend meeting.

This has also led short-term interest rates lower.

Key September three-month euroyen futures earlier rose to 99.720, on a par with the record high hit on May 21 last year. It now stands at 99.705, up 0.035 from Monday's day session settlement.

One-month TIBOR was also down at 0.08857 percent on Tuesday, compared with 0.09214 percent on Monday.

March 10-year Japanese government bond futures ended moderately firmer, but off seven-month high of 134.13 hit earlier as corrective sales set in after quick gain of more than one full point since Friday close. Bond market also turned cautious about chasing prices higher ahead of a 10-year JGB auction on Thursday since higher prices will result in lower coupon rate.

Earlier rallies in bond market spurred after G7 nations pressed BOJ to maintain its zero interest-rate policy, which has also led short-term interest rates lower. Key September three-month euroyen futures earlier rose to 99.720, on a par with the record high hit back in May 21. It now stands at 99.705, up 0.035 from Monday's day session settlement. One month TIBOR at 0.08857 percent on Tuesday, down from 0.09214 percent on Monday.

March futures ended at 133.93, up 0.23 from Monday. Cash bonds holding firmer with 219th 10-year cash JGB traded at 1.625 percent, compared with Monday's 1.660 percent.

The yield was as low as 1.620 percent earlier. Government-affiliated financial agencies seen to have bargain-hunted 10-year zone cash bonds on downside. Result of one-trillion yen two-year notes auction was sound with low tail of one basis point on price basis and bid-to-cover ratio of 3.51 versus 2.63 in previous auction.-Reuters