Japanese government bond futures edged up on Monday as worries about the domestic and global economies underscored the prevailing view that the Bank of Japan will keep interest rates steady in the coming months. The market also drew support from gains in US Treasuries late last week after falling energy prices reduced fears of inflation.
JGB futures rose towards a four-month high, despite slipping into negative territory at one stage. The climb comes after futures bounced back sharply on Friday after falling nearly a full point on foreign investors' profit-taking. Speculators were wary of selling into futures after seeing how easily the contracts rebounded from troughs on Friday, traders said.
Money market futures suggest some investors have started to see a small chance of a BoJ rate cut by March next year. But some traders urged caution about reading too much into the numbers, saying price moves were exaggerated as trading remained slow with few players. September futures edged up 0.15 point to 137.84, staying in sight of a four-month high of 138.12 hit last week. They had slipped earlier in the day on a firmer Nikkei share average which gained 1.1 percent.
The lead JGB futures contract had tumbled as low as 136.90 on Friday. The benchmark 10-year yield dropped 1 basis point to 1.445 percent, near a four-month low of 1.415 percent touched last week. The five-year yield declined 1.5 basis points to 1.005 percent The yield initially rose to 1.025 percent as some dealers sold the note to make room in their books ahead of a five-year auction on Wednesday, but the selling invited bargain hunting from financial institutions.
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