JGB futures rise as Europe debt woes continue to spread
* December 10-year JGB futures closed the Wednesday
morning session up 0.13 point at 142.61, clinging to their
20-day moving average at 142.58.* The Nikkei stock average lost 0.6 percent on
Wednesday, after Alcoa Inc’s earnings suggested that
Europe’s debt crisis was set to hurt U.S. corporate profits.* Investors took comfort after Germany and France pledged to
deliver a plan to protect Europe’s banks, but many market
participants doubt that risk assets have much room for further
gains, given concerns over whether euro zone policymakers will
be able to form a united response to the debt crisis.* “Capital injections into banks by governments or the EFSF
(European Financial Stability Facility) mean using tax money and
that is not something that’s easy to get agreement on, so we
still need to watch arguments at meetings such as the EU
summit,” said Makoto Yamashita, chief Japan interest rate
strategist at Deutsche Securities.Germany and France, the leading powers in the 17-nation euro
zone, have promised to propose a comprehensive strategy to fight
the debt crisis at an EU summit delayed until Oct. 23.* In cash bonds, the 10-year yield edged down
0.5 basis point to 0.985 percent, but stayed in the middle of a
range near 1 percent that has been in place since last month.
There was little reaction in the JGB market to a retreat in
prices of U.S. bonds on Tuesday.”If the 10-year Treasury yield rises above 2.5
percent, I don’t think the 10-year JGB yield will stay at 1
percent … but at the moment it is staying around that level
because European and U.S. yields remain in recent ranges. It is
hard for worries about the economy and the financial system to
just disappear,” said Yamashita.* JGBs have also been well supported by demand from
investors who have been looking to purchase JGBs on dips to meet
their investment plans for the second-half of fiscal year that
started this month, market participants said.
