Japanese government bonds were higher at the end of the morning session on Tuesday following a jump in U.S. Treasuries overnight as investors sought safe-haven bets due to revived worries about the financial sector.

Japanese shares ended the morning lower, with the Nikkei 225 index falling 2.2 percent to 13,066.44.

Investors were also waiting for a bond auction early on Tuesday afternoon. The finance ministry set a 0.8 percent coupon for 1.7 trillion yen worth of 2-year bonds, lower than the previous auction’s 0.9 percent for the same maturity held last month.

The government released weak economic data this morning. Japan’s unemployment rate hit a two-year high of 4.1 percent last month while job openings slumped to over three-year lows as companies became increasingly reluctant to hire new staff amid rising inflation and sluggish demand.

Household spending fell 1.8 percent in June from a year earlier.

“As expectations for rate hikes fade and speculation about economic deceleration strengthens, domestic funds are likely reflecting on a gradual shift into the bond market,” Chotaro Morita, head of fixed income strategy at Barclays Capital, said in a report to clients.

At the midday break, the yield on the benchmark 10-year bond had fallen to 1.530 percent from 1.565 percent on Monday.

The yield on the two-year note had slipped to 0.780 percent from 0.795 percent, while the yield on the five-year note had dipped to 1.110 percent from 1.145 percent.

The yield on the 20-year bond fell to 2.180 percent from 2.205 percent and there were no successful transactions in the 30-year bond.

Bond prices move inversely to yields.

The price of the September futures contract rose to 136.33 yen from 135.88 yen on Monday.

($1=107.35 yen)

Source: http://www.afxnews.com

Related Content