Japanese government bonds end morning flat to higher after stocks fall

Tue, Apr 8 2008, 03:35 GMT
http://www.afxnews.com

TOKYO (Thomson Financial) - Japanese government bond prices were flat to firmer at the end of the morning session on Tuesday as some investor interest shifted to the safety of bonds after stocks declined.

On the Tokyo stock exchange, the Nikkei index ended the morning session down 0.9 percent at 13,325.01 on cautious trade after the start of the quarterly earnings season in the United States.

But the advance in the bond market was mild ahead of the Bank of Japan's (BoJ) monetary policy decision on Wednesday and the Group of Seven (G7) finance leaders' meeting on Friday.

Investors are widely expecting the central bank to leave its overnight call rate target steady at 0.5 percent, but are focusing on whether the BoJ will downgrade its view on the economy.

"Some hold the view that the BoJ will lower interest rates (in the near future). But in reality it is a question of how many agree with that. So the yield (on the 10-year bonds) is moving in a range of 1.3 percent and 1.4 percent," said Satoshi Okumoto, general manager at Fukoku Mutual Life Insurance.

Meanwhile, investors are waiting to see if the seat of BoJ governor will finally be filled before the weekend G7 meeting.

On Monday, Japan nominated BoJ deputy governor Masaaki Shirakawa for the position after the first two choices were voted down by the opposition.

The opposition party looks likely to back Shirakawa, who spent more than three decades at the BoJ, working his way up to the post of executive director before leaving in 2006 to become a professor at the Kyoto University School of Government.

At midday, the yield on the benchmark 10-year bond was down slightly at 1.335 percent from 1.340 percent late on Monday.

The yield on the two-year note was steady at 0.565 percent, while the yield on the five-year note fell to 0.790 percent from 0.815 percent.

The yield on the 20-year bond dipped to 2.045 percent from 2.055 percent and the yield on the 30-year bond was unchanged at 2.360 percent.

Bond prices move inversely to yields.

The price of the June futures contract for the 10-year bond advanced to 139.75 yen from 139.43 yen late on Monday.

($1 = 102.34 yen)