Japanese government bonds end morning mostly lower on easing credit crisis fears

Wed, Apr 2 2008, 03:16 GMT
http://www.afxnews.com

TOKYO (Thomson Financial) - Japanese government bond prices were mostly lower at the end of Wednesday morning trade after investors showed some risk appetite, shifting funds to the equity market following news that Lehman Brothers Holdings Inc. and Switzerland's UBS AG issued new shares to help bolster their balance sheets.

The U.S. Treasury market dropped overnight on fresh expectations that the credit crisis might be waning.

Japanese shares rallied in morning trade, driving the benchmark Nikkei 225 back to the 13,000-point level for the first time since March 12. The index ended the session up 3.3 percent at 13,079.11 points.

"The excessive risk-averse attitude in financial markets seems to have calmed down following that news about the financial firms' capital reinforcement," said Maki Shimizu, fixed-income strategist at UBS Securities.

At the same time, bond investors remained skeptical of the view that the worst of the credit crisis is over, as indicated by the fact losses in the bond market have not been excessive but trimmed to some extent.

"The market may make some temporary adjustments again, as it did this morning. But investors remained cautious and they refrained from aggressive selling of bonds as the credit market has not really recovered and it (the crisis) may even worsen," she said.

Investors will continue to take their cues from factors overseas, including Federal Reserve chairman Ben Bernanke's scheduled testimony about the economic outlook before Congress later in the day.

The U.S. will also release its ADP national employment report for March today and its jobs report on Friday.

At midday, the yield on the benchmark 10-year bond was up at 1.360 percent from 1.355 percent late Tuesday.

The yield on the two-year note was slightly higher at 0.585 percent from 0.580 percent, while the yield on the five-year note rallied to 0.815 percent from 0.805 percent.

The yield on the 20-year bond dropped to 2.115 percent from 2.130 percent, while the yield on the 30-year bond was flat at 2.440 percent.

Bond prices move inversely to yields.

The price of the June futures contract for the 10-year bond edged up to 139.83 yen from 139.80 yen late on Tuesday.

($ 1 = 101.77 yen)