Japanese govt bonds end morning mixed after Fukui comments, ahead of auction

Japanese govt bonds end morning mixed after Fukui comments, ahead of auction

	Published : Fri, 12 Oct 2007 04:25 By : Agencies Print this Story

TOKYO (Thomson Financial) - Japanese government bond prices ended Friday morning mixed on expectations the central bank may not hike interest rates this year and as investors awaited the results of the auction of five-year bonds.

'The bond market is expected to trade in tight ranges for the rest of this year because the subprime mortgage problem will remain unsolved,' said Yuuki Sakurai, general manager at Fukoku Mutual Life Insurance.

'Also the Bank of Japan is unlikely to raise interest rates soon after governor Fukui mentioned the need to continue to watch global financial markets,' he said.

The Bank of Japan on Thursday kept its overnight call rate target unchanged at 0.5 percent for the ninth straight meeting, a decision that was widely expected.

BoJ governor Toshihiko Fukui said after the meeting he has witnessed some improvements on

global financial markets which were hit hard by the credit crisis.

But the top central banker stopped short of showing any strong resolve to adjust interest rates in Japan, citing the need to keep closely monitoring developments on international financial markets and the global economy.

'International financial markets showed some improvement, as evidenced by rises on the stock market to pre-crisis levels, but they continue to be unstable as a whole,' Fukui said.

Market players are also waiting for the outcome of the bond auction this afternoon. The Ministry of Finance has set a coupon of 1.3 percent on 2.0 trillion yen worth of five-year government bonds to be auctioned today, up from 1.1 percent at last month's auction.

The results of the auction will be announced at 12.45 pm (0345 GMT).

At the break, the yield on the benchmark 10-year bond was unchanged at 1.735 percent from late Thursday.

The yield on the two-year note slipped to 0.895 percent from 0.900 percent, while the yield on the five-year note dropped to 1.270 percent 1.285 percent.

The yield on the 20-year bond edged up to 2.250 percent from 2.240 percent and the yield on the 30-year bond rose to 2.505 percent from 2.495 percent.

Bond prices move inversely to yields.

The price of the December futures contract for the 10-year bond rose to 134.45 yen from 134.30 yen Thursday.

(1 US dollar = 117.32 yen)

kaori.kaneko@thomson.com

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