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JGBs stay resilient even as Japanese stocks rally

Wednesday, 27 Nov 2013 | 10:16 PM ET

TOKYO, Nov 28 (IFR) - Japanese government bonds were resilient on Thursday morning, ahead of a two-year debt auction, even though investors were in a "risk-on" mood with Tokyo shares jumping to a six-month high.

The 10-year yield added 0.5 basis point to 0.605 percent, while 10-year JGB futures were little changed at 145.07, hovering near their three-week high touched on Wednesday.

The seven- to 10-year sectors trimmed earlier losses on expectations that the Bank of Japan would continue to buy JGBs, as part of its drive to lift the world's third-largest economy out of persistent deflation.

Earlier, data showed Japanese retail sales in October rose 2.3 percent from a year earlier, beating a median forecast for a 2.1 percent annual increase and in a sign that consumer spending could be picking up.

Dealers were also reluctant to sell JGBs short on anticipation that a large public pension fund was expected to buy long-term and superlong JGBs on Friday and next Monday for its turn-of-the-month duration adjustments.

The two-year yield was unchanged at 0.090 percent, ahead of the sale of 2.9 trillion yen ($28.4 billion) of two-year bonds by the Ministry of Finance later in the day.

Both the five- and 20-year yields were up 0.5 basis point, at 0.190 and 1.475 percent, even though the Nikkei share average climbed 1.5 percent to a six-month high on Thursday morning.