Japanese government bond prices ended the morning session mostly lower on Monday after the U.S. Federal Reserve and the Treasury announced steps to shore up troubled U.S. mortgage giants Fannie Mae and Freddie Mac.

The Fed said it granted the Federal Reserve Bank of New York authority to lend to the two companies “should such lending prove necessary.” They would pay 2.25 percent for any borrowed funds — the same rate given to commercial banks and big Wall Street firms.

“Recent flight-to-quality movement has eased. But there is still uncertainty about the financial sector and the impact of the announcement might be short-lived,” said Satoshi Yamada, general manager at Okasan Asset Management.

Japanese stocks rose as the news helped eased worries about the U.S. financial sector, with the Nikkei 225 index gaining 1.1 percent at 13,185.90 at the end of morning trading.

“This week is expected to bring a reversal of the downtrend in share prices and yields that came amid the mounting uncertainty in U.S. credit markets. We look for bear flattening in reaction to the overshoot linked to credit concerns, as in March, though this will depend on how positively the equity market reacts at a time when there is persistent uncertainty related to oil prices,” Chotaro Morita, head of fixed income strategy at Barclays Capital, said in a report to clients.

One of the events market players are looking forward to include the Bank of Japan’s two-day monetary policy meeting which starts today. The central bank is expected to keep rates unchanged

amid dim prospects for the global economy due to surging crude oil prices and shaky credit

markets.

Fed Chairman Ben Bernanke will testify on monetary policy before U.S. Congress on Tuesday and Wednesday. The minutes of the Fed meeting on June 24-25 and the Fed’s Beige Book will be released later this week.

At the midday break, the yield on the benchmark 10-year bond rose to 1.615 percent from

1.595 percent on Friday.

There was no successful transaction in the two-year note, which closed Friday with a yield of 0.775 percent. The yield on the five-year note increased to 1.160 percent from 1.140 percent.

The yield on the 20-year bond edged up to 2.205 percent from 2.185 percent.

There were no transactions in the 30-year bond as well, which closed Friday with a yield of 2.410 percent.

Bond prices move inversely to yields.

The price of the September futures contract declined to 135.78 yen from 135.98 yen on Friday.

($1=106.60 yen)

Source: http://www.afxnews.com

Related Content