JGB futures slip on Europe steps; quiet before BoJ

TOKYO: Japanese government bond futures slipped on Friday after the European Central Bank took steps to contain the euro zone debt crisis by pumping cash into the banking system, reducing safe-haven bids for bonds and lifting share prices.
Investors have been looking to purchase JGBs on dips to meet their investment plans for the second half of fiscal year, but they largely stuck to the sidelines on Friday before the Bank of Japan's policy meeting result and the US jobs report later in the day, market participants said.

"Investors had been eager to buy until yesterday, especially those who couldn't buy the new 10-year bonds at the auction on Tuesday, but they have become very quiet," said a trader at an European brokerage firm.
The 10-year yield climbed 1.5 basis points to 0.985 percent, after slipping on Thursday to match a 10-month low of 0.965 percent marked in September. Superlongs, 20- and 30-year bonds, performed better than other maturities. The 20-year yield fell 0.5 basis point to 1.700 percent and the 30-year yield also slipped 0.5 basis point, to 1.905 percent.

December 10-year JGB futures were down 0.09 point at 142.64, after declining to 142.56 to match the Ichimoku kijun-sen, which has been a support.

New claims for US unemployment benefits rose slightly less than expected last week, hinting at an improved labour market a day before the closely watched non-farm payrolls report due at 1230 GMT.

Economists polled by Reuters expect employers added 60,000 jobs in September after no net hirings in August.

But JGB losses are expected to be limited with the 10-year yield seen staying near 1 percent in the medium term as Japanese investors with ample cash are eager to buy on dips, said a fund manager at a Japanese asset management firm.

"The recent unwinding of 'risk-off' positions didn't have much influence on JGBs. If the US jobs report shows strong figures, we may see more unwinding, but a sharp correction in JGB prices is unlikely as investors' concerns are centred on the euro zone debt crisis, which will not be resolved easily."The ECB, wary of the region's fiscal woes spiralling into a global crisis, said it will revive 12-month loan operations and purchases of covered bonds, though it kept key interest rates unchanged at 1.50 percent.