Thursday January 22, 07:22 AM
JGB futures little changed after BOJ, Shirakawa eyed
By Rika Otsuka
TOKYO, Jan 22 (Reuters) - Japanese government bond futures
were little changed on Thursday, recovering from earlier losses,
after the Bank of Japan left interest rates alone and sharply
revised down its growth outlook.
As expected, the central bank on Thursday left the overnight
call rate target at 0.10 percent at the end of its two-day policy
meeting, while predicting the world's No.2 economy would contract
for two full years through March 2010.
The central bank said the economy would likely shrink 1.8
percent in the current fiscal year to March and contract 2.0
percent the following year, down from its forecasts issued in
October for growth of 0.1 percent and 0.6 percent, respectively.
'Traders bought back JGB futures, a little surprised by a
very pessimistic view on the economy by the BOJ,' said a senior
bond trader at a European brokerage.
Shorter-dated notes benefitted the most as the central bank's
economy outlook supported expectations that it would take some
time before Japanese interest rates start to rise.
The central bank also warned that the country faced two years
of deflation.
March futures were down 0.01 point at 139.64, off
the day's low of 139.21.
The benchmark 10-year yield edged up 0.5 basis points to
1.230 percent.
Longer-dated paper suffered as investors felt the amount of
longer-dated bonds the BOJ plans to buy from now on was smaller
than the market had expected.
The 30-year yield rose 3 basis points to 1.905 percent , while the two-year yield edged down 0.5 basis
point to 0.355 percent. The yield curve steepened,
as a result.
The market will look to comments from BOJ Governor Masaaki
Shirakawa at a post-meeting news conference for clues about the
BOJ's next policy step.
(Editing by Brent Kininmont)
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