JGB 10-year yield hits 5-month low on view Fed to delay tapering

Reuters

* 20- and 30-year yields also fall to 5-month low

* 10-year JGB futures climb to 5-month high

TOKYO, Oct 23 (Reuters) - Japanese government bond pricesrose on Wednesday, with the 10-year yield hitting a five-monthlow, buoyed by gains in U.S. Treasuries after slower U.S. jobgrowth reduced expectations the Federal Reserve will cut itsstimulus this year.

The 10-year yield was down 1 basis point at0.605 percent after earlier touching 0.600 percent, its lowestsince May 9.

Yields on longer maturities also fell to a five-month low,leading to a flattening of the yield curve. The 30-year yield eased 2.5 basis points to 1.580 percent and the20-year yield fell 2 basis points to 1.450percent.

Overnight, yields on benchmark 10-year U.S. Treasuries fell 9.7 basis points to 2.512 percent to theirlowest level since July 24 after data showed September jobgrowth slowed to its weakest pace in 15 months.

A Reuters polled conducted on Tuesday showed nine of 15 U.S.primary dealers see the Fed tapering in March, with many of themblaming Washington's fiscal impasse for having a "significant"impact on the Fed's timing to scale back its stimulus.

In addition, the Bank of Japan offered on Wednesday to buy800 billion yen ($8.2 billion) worth of JGBs with residualmaturities of between one and more than 10 years, as part of itsbond-buying programme to revive the world's third-largesteconomy.

JGB yields have been on a downtrend lately, helped by buyingthis month from Japanese investors including pension funds andlife insurance companies. October is the start of the secondhalf of Japan's fiscal year.

Nippon Life Insurance plans to increase its yen bondholdings in the six months to March but is also ready to buyforeign bonds as well if it can buy dollars and euros on dips,the company said on Tuesday.

Although the BOJ's aggressive monetary policy in Aprilsparked speculation that many Japanese life insurers might rushinto foreign bonds to earn higher returns, Nippon Life's stanceis a reflection of little change in industry investmentpatterns.

But Barclays Capital analysts said they were wary aboutchasing JGB prices higher as buying by Japanese investors mayrun its course in the second half of October.

"Although the room for flattening in 10s and longer could betested again toward month-end, we believe participants shouldavoid chasing any decline in 10-year yields," they wrote in anote.

Ten-year JGB futures added 0.15 to 144.94, hittingtheir highest in five months.

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