Forex Information and Trading News

Japanese govt bonds close down on Nikkei gains, but off lows on auction

Japanese government bond prices closed lower on Thursday following declines in U.S. Treasury prices and the Nikkei’s gains but favourable results at the auction of 30-year debt helped trim losses.

The lowest accepted price at the auction of 600 billion worth of 30-year bonds was 100.85 yen with the yield of 2.450 percent. The tail, or the difference between the lowest accepted price and the average bid, was 0.11 yen, the same as the previous auction.

“The auction results were almost in line with market expectations or slightly better,” said Kazuya Ito, a fund manager at Daiwa SB Investments. He said the auction drew firm demand since there had been short positions for the 30-year tenor. The gains in the equity market trimmed appetite for bonds. Tokyo’s Nikkei index rose 1 percent to 12,887.95 as investors took their cue from the rally on Wall Street overnight spurred by a sharp drop in oil prices and better-than-expected earnings at Wells Fargo.

Investors will be looking for more clues about the state of the U.S. financial sector when JPMorgan Chase & Co and Merrill Lynch announce their second-quarter results on Thursday. “With an unstable financial sector and the impact of the tax rebates by the U.S. government wearing off, it is not easy for the Fed to raise rates unless the economic environment is ready,” said Satoshi Yamada, general manager at Okasan Asset Management.

Federal Reserve Chairman Ben Bernanke, during his testimony to Congress, acknowledged that the situation is difficult for policymakers as they try to chart a course of righting the economy and preventing inflation from getting worse. Consumer prices in the U.S. shot up in June at the second fastest pace in 26 years, with two-thirds of the surge blamed on soaring energy prices, the government reported on Wednesday.

The yield on the benchmark 10-year bond rose to 1.580 percent from 1.565 percent on Wednesday. The yield on the two-year note increased to 0.760 percent from 0.745 percent, and the yield on the five-year note was up at 1.125 percent from 1.115 percent. The yield on the 20-year bond rose to 2.215 percent from 2.185 percent, and the yield on the 30-year bond increased to 2.445 percent from 2.405 percent. Bond prices move inversely to yields.

The price of the September futures contract was barely changed at 136.40 yen, compared to 136.42 yen on Wednesday.