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Japan's govt bonds

futures finish lower

TOKYO: Japanese government bond (JGB) futures closed lower after Tokyo stocks' vigorous recovery induced sales, dealers said.

Prices briefly rose in the jittery afternoon trade, as rumours of Bank of Japan hearings about money market operations fuelled hopes that the central bank may start to buy more bonds. But the Nikkei average extended gains towards the closing to finish the day 536.15 points higher at 17,452.72, a 24-week high, discouraging yen bonds again.

The key September futures closed 0.36 lower at 118.19. Turnover was 42,684 contracts.

The futures briefly dipped to 118.14 in early afternoon, but dealers were cautious of selling close to around 118 flat, where a sudden wave of buying back pushed back the futures higher at Monday's close.

Some investors bought the futures at around 118.20 later in the afternoon, helping them to rebound at one point.

Investors' activity in the cash bond market was limited to a few sales in the morning and sporadic cautious buying in the afternoon. The lack of investors' movements, due to summer holiday's in many Japanese companies, was another reason trading was relatively thin and nervous, dealer said.

Dealers first went short in the morning "since they bought back enough on Monday and made their positions fight," said a securities house dealer. "And just when people wanted to buy back, the rumours started to spread in the market and they were used as an excuse for buying."

But the buying-back did not last long and was overwhelmed by new selling, prompted by the stocks' rise.

The benchmark 174th 10-year bond yielded 3.115 percent at 07.38 GMT, against 3.055 percent at Monday close. Yields ranged between 3.040 percent and 3.11 percent.-Reuter