JGBs skid on soaring stocks, sagging Treasuries
* 10-yr yield rises to 3 1/2-month high
* 10-yr futures touch lowest intraday level since May
* 30-yr yields touch highest level in over a year
TOKYO, Jan 4 (Reuters) - Japanese government bonds skidded on their first trading day of 2013 on Friday, with benchmark yields marking their biggest one-day gain since August, hitting a 3 1/2-month high in line with surging Japanese equities and a drop in U.S. Treasuries prices. The 10-year JGB yield gained 4 basis points to 0.835 percent, its highest level since Sept. 13 and its biggest one-day basis-point move since Aug. 7. Benchmark yields dropped as low as 0.685 percent as recently as Dec. 6, their lowest since June 2003. Tokyo markets reopened after the long New Year's holiday with expectations that 2013 will bring more fiscal and monetary stimulus measures in Japan, with the U.S. monetary outlook less clear after release of the minutes of the Fed's December meeting. While the Fed looks set to continue buying bonds, some policymakers are reticent about further increasing its $2.9 trillion balance sheet. The minutes prompted some investors to re-evaluate their supply/demand expectations and led to a sell-off in U.S. Treasuries that sent benchmark yields soaring to 8-month highs.
"Japan was off for a few days and now has to catch up to some big overseas moves," said Ayako Sera, market economist at Sumitomo Trust and Banking. "With stocks soaring so much today on the weaker yen, it is not surprising that there isn't much buying in JGBs," she said. While the U.S. "fiscal cliff" budget impasse was resolved earlier this week, a looming showdown on an increase in the U.S. debt ceiling could support bond prices going forward, she added. The deal to avert the fiscal cliff covered only taxes and delayed decisions on expenditures until March 1. Still, Japan's Nikkei share average added 2.8 percent to a 22-month high on its first trading day of 2013 as the yen's drop against the dollar to its weakest level since July 2010 lifted exporters.
The benchmark 10-year JGB futures contract ended down 0.33 point at 143.32, after falling as low as 143.20 in the morning session, which was its lowest since late May. Volume was a moderate 26,847 contracts. Futures moved further away from Dec. 7's intraday high of 145.26, which was the highest level ever for a 10-year JGB futures contract. Yields on 20-year bonds gained 2 basis points to 1.780 percent, after earlier rising as high as 1.790 percent, their highest since early April. Yields on 30-year bonds added 1.5 basis points to 1.990 percent after touching 1.995 percent, their highest since December 2011. Longer maturities have come under pressure over the past several weeks, on concerns about the aggressively reflationary policies of the new Japanese government led by Prime Minister Shinzo Abe. Abe has called on the Bank of Japan to set a 2 percent inflation target, and has also vowed to select someone who shares his views on drastic stimulus to succeed BOJ Governor Masaaki Shirakawa when his term expires in April. Abe said on Friday that it was important for the BOJ to take responsibility for achieving a 2 percent inflation goal, Jiji news agency reported. The Jiji report also quoted Abe as saying the government aims to compile by the end of this month a draft budget for the fiscal year that starts in April.