A weekly gauge of sentiment in the Japanese government bond market improved sharply, after the prices of short-term notes soared the previous week on expectations of Bank of Japan rate cuts, the latest Thomson Reuters poll showed on Tuesday.
The poll's JGB bull-bear diffusion index, calculated by subtracting the number of bearish market players from those who are bullish, was minus 9, up from minus 43 in the previous survey.
Though the index was still in negative territory for a sixth straight week, the rise from the previous week was the biggest since mid-July, when the index rebounded 55 points after hitting a record low of minus 61.
The five-year JGB yield hit a record low of 0.135 percent last week, as investors bet the Bank of Japan may effectively cut interest rates by scrapping interest payment on banks' excess reserves.
"Because the fall in short- to medium-term bond yields are almost reaching the limit, the impact will likely start to filter through to long-term bonds," said Kazuhiko Sano, chief fixed income strategist at Tokai Tokyo Securities.
The median forecast for the benchmark 10-year JGB yield at the end of this week was 0.750 percent, slightly below Friday's closing level of 0.755 percent. Japanese financial markets were closed on Monday for public holiday. The online survey of 95 JGB market participants from major institutions received 35 responses, for a response rate of 36.8 percent. These included 19 "real money" investors from institutions such as banks, pension and investment funds, and insurance companies.
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