Japanese government bonds were narrowly mixed on Friday, sticking close to recent ranges even in the face of surging stock prices, as investors waited for US non-farm payrolls data to get clues on the strength of the American economic recovery. Stocks gained broadly ahead of news from Athens.
Greece announced on Friday that 85.8 percent of private creditors had accepted its bond swap offer and that the rate would reach 95.7 percent with the use of collective action clauses to enforce the deal, making it likely that country will secure the bailout funds it needs to avoid a chaotic default.
Investors also awaited next week's regular Bank of Japan policy meeting for the latest signals on further stimulus steps. "Expectations that the Bank of Japan will ease further is keeping the front end incredibly strong, and the back-end sold off a little bit today," said Le Ngoc Nhan, a JGB strategist at Morgan Stanley.
At its two-day meeting which concludes on Tuesday, the BOJ is expected to extend a loan programme for growth industries and stress its readiness to take more monetary steps. Some strategists expect the central bank to eventually expand its asset-buying programme, in which it buys bonds with up to two years left to maturity. At its meeting last month, the BOJ increased the size of the plan, saying it will spend an extra 10 trillion yen ($122.5 billion) on JGB purchases.
The central bank also might eventually extend the duration of JGBs it purchases under the plan. "The market has started expecting the BOJ to do something, either at this meeting or the next," said Nhan. "If the BOJ fails to deliver, forex is going to come back down, and the BOJ is going to be under pressure from politicians." The dollar has appreciated against the yen since the BOJ surprised with its easing last month.
Ten-year JGB futures inched down 0.01 point to 142.29. The yield on the latest 10-year JGB was flat at 0.985 percent. The yield on the 5-year note added half a basis point to 0.305 percent, while the 30-year note underperformed, with its yield adding one basis point to 1.955 percent.
The nonfarm payrolls figures could take away some of the safe-haven appeal of bonds if they offer more evidence that the US recovery is picking up pace, suggesting the US Federal Reserve will be less likely to take further stimulus steps anytime soon. Economists surveyed by Reuters expect employment to have increased by 210,000 jobs in February, after rising by 243,000 in the previous month. The unemployment rate is expected to be steady at a three-year low of 8.3 percent in February.