Japanese government bonds ended the morning session mixed on Wednesday after a rebound in stocks and sharp increase in machinery orders prompted investors to lock in recent gains, while other players opted to buy bonds on dips.

Japan’s core private-sector machinery orders rose a seasonally adjusted 10.4 percent to 1.11 trillion yen ($10.3 billion) in May from April, the second straight monthly increase and well ahead of market expectations, data from the Cabinet Office showed on Wednesday.

Economists had forecast a 0.8 percent increase in orders for the month, following a 5.5 percent rise in April. The May reading was the fastest since January when orders rose 17.3 percent.

“The rise in stocks and better-than-expected machinery orders led investors to take profit. But the impact from the economic data was short-lived, and share prices’ upside turned heavy, encouraging some investors to buy back bonds,” said Kazuya Ito, fund manager at Daiwa SB Investments.

On the Tokyo stock exchange, the Nikkei 225 index ended the morning session 1.8 percent higher at 13,270.27.

Although the JGB market showed a mixed trend in the morning, “the market themes of flight to quality and worries about the financial market remained intact,” Ito said.

Federal Reserve Chairman Ben Bernanke said in a speech overnight that the U.S. central bank may extend its lending efforts to investment banks. The Fed had begun allowing the big companies to borrow after the near-collapse of Bear Stearns earlier this year.

At the Federal Deposit Insurance Corp’s forum on mortgage lending, where Bernanke spoke, JP Morgan Chase & Co Chief Executive Jamie Dimon said “the future is very, very bright,” but that “I do think we have some very serious issues to face.”

Treasury Secretary Henry Paulson, meanwhile, made an upbeat assessment of the government’s efforts to prevent the volume of mortgage foreclosures that touched off the credit crisis last year, although he also said he expects foreclosures to continue.

Investors were looking ahead to more comments from Bernanke when he testifies on regulatory restructuring before the Committee on Financial Services at the U.S. House of Representatives on Thursday.

At the midday break, the yield on the benchmark 10-year bond was at 1.650 percent, up from 1.615 percent late Tuesday.

Bond prices move inversely to yields.

The yield on the two-year note was steady at 0.825 percent, while the yield on the five-year note inched up to 1.210 percent from 1.205 percent.

The yield on the 20-year bond slipped to 2.160 percent from 2.170 percent. There were no transactions in the 30-year bond.

The price of the September futures contract dipped to 135.20 yen from 135.58 yen on Tuesday.

($1=107.45 yen)

Source: http://www.afxnews.com

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