Japanese government bond futures soared more than a full point on Friday to a five-month high, with investors dumping risky positions in stocks and shifting funds into safe-haven debt. The Nikkei average lost 2.8 percent to finish at a 5-1/2-month low as investors fretted about the global economy's health.
Data during the day showed Japanese companies unexpectedly cut capital spending in the second quarter, likely meaning the economy contracted even more than previously estimated during the April-June period. JGB futures reversed a sharp slide the previous day in what analysts said were very thin conditions where it is easy for players to shove the market around.
But analysts also said that 10-year yields would likely have a tough time falling below their four-month low of 1.400 percent as long as the Japanese economy does not deteriorate much more and the Bank of Japan keeps interest rates on hold.
The benchmark 10-year yield dropped 5 basis points to 1.460 percent, but for the week yields were down only slightly and holding above the 1.400 percent level. The five-year yield was down 5.5 basis points at 1.025 percent, while the two-year yield dipped 2 basis points to 0.725 percent as the yield curve flattened.
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