Japanese govt bonds close higher on auction results, weak shares

Japanese govt bonds close higher on auction results, weak shares

	Published : Sun, 14 Oct 2007 20:53 By : Agencies Print this Story

TOKYO (Thomson Financial) - Japanese government bond prices closed higher Friday after the auction of five-year government bonds showed healthy demand and the stock market declined.

The Ministry of Finance said the lowest accepted price at its auction of 2.0 trillion yen worth of five-year Japanese government bonds was 100.18 yen, giving a yield of 1.261 percent.

Of the successful bids, 61.3964 percent were made at the lowest price, the ministry said. The average bid was 100.20 yen, giving a yield of 1.256 percent.

The bonds carry a coupon of 1.3 percent. They will be issued on October 25 and mature on September 20, 2012, the ministry said.

'The auction results showed healthy demand which helped investors to step into buying bonds,' said Kazuya Ito, a fund manager at Daiwa SB Investment.

'Also, investors were in an easier environment for buying bonds now that the Bank of Japan's monetary policy meeting is over,' Ito said.

On Thursday, the Bank of Japan's policy board decided to keep its overnight call rate target unchanged at 0.5 percent for the ninth straight meeting - a decision that was widely expected.

Central bank governor Toshihiko Fukui said after the meeting he has witnessed some improvements in global financial markets, which were hit hard by the credit crisis.

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

A decline in Japanese share prices also helped the bond market, with the benchmark Nikkei index losing 0.7 percent to 17.331.17.

The bond market is likely to move in narrow ranges next week, with few incentives until the end of this month. Expected leads for the market include Japan's consumer inflation data for September, due on October 26, the Bank of Japan's outlook for economic activity and prices, and the Federal Reserve's monetary policy decision on October 31.

The yield on the benchmark 10-year bond closed at 1.705 percent, down from 1.735 percent late Thursday.

The yield on the two-year note slipped to 0.870 percent from 0.900 percent and the yield on the five-year note dropped to 1.240 percent from 1.280 percent.

The yield on the 20-year bond declined to 2.225 percent from 2.240 percent and the yield on the 30-year bond slipped to 2.480 percent from 2.490 percent.

Bond prices move inversely to yields.

The price of the December futures contract for the 10-year bond rose to 134.72 yen from 134.30 yen Thursday.

(1 US dollar = 117.32 yen)

kaori.kaneko@thomson.com

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