JGBs fall on weak Treasuries, Nikkei surge

(Reuters) - Super-long maturities were weighed down by concerns about
auctions later in the month, while investors wary of the sharp
rebound in stocks unwound their holdings of medium-term JGBs.




Comments by Bank of Japan Governor Toshihiko Fukui the
previous day that were seen as signalling a rate hike as early as
August also kept buyers on the sidelines, traders said.


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Yen May Extend Declines Versus Dollar, Euro Before Announcement on Rates

(Bloomberg) -- The yen may fall versus the dollar
and euro for a second day as the Bank of Japan is expected to
keep its benchmark interest rate at 0.5 percent, the lowest
among major economies.

Traders may continue to borrow in yen to fund so-called
carry trade investments in higher-yielding assets. Japan's
consumers were the most pessimistic in more than two years last
month, a Cabinet Office report showed yesterday.


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Japan Shares Gain, Led by Honda, on U.S. Manufacturing Report; Sony Drops

(Bloomberg) -- Japanese stocks advanced, paced by
automakers such as Honda Motor Co., after manufacturing in the
U.S. unexpectedly climbed to a 14-month high, boosting
confidence Japan's largest export market will weather a weak
housing market.

JFE Holdings Inc. led declines by steel companies on
concern higher costs and overproduction will erode profits. The
Bank of Japan's quarterly Tankan survey that was released
yesterday showed sentiment among steelmakers slid to 38 points
from 46 at the last survey.


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Yen Rebounds Against Euro as U.K. Terror Attacks Spark Risk Aversion

(Bloomberg) -- The yen rebounded from a record low
versus the euro after terrorists targeted central London and
Glasgow, prompting investors to pare purchases of riskier assets.

Japan's yen advanced against 12 of the 16 most-actively
traded currencies tracked by Bloomberg as investors unwind so-
called carry trades. The yen also gained versus the dollar as the
Bank of Japan's Tankan report showed confidence among
manufacturers held near a two-year high, adding to expectations
the central bank will raise interest rates this year.


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Japan's Government Bonds Head for Weekly Loss on Outlook for Global Growth

(Bloomberg) -- Japan's five-year government notes
headed for a weekly decline as signs of global growth prompted
investors to raise bets interest rates will rise.

Five-year yields headed toward a record high touched last
week as a report yesterday showed the Philadelphia Federal
Reserve Bank's factory index jumped to the highest in more than
two years in June, sending U.S. Treasuries lower. Bank of Japan
Deputy Governor Toshiro Muto yesterday said the world's second-
largest economy is expanding moderately and the bank will raise
rates gradually based on conditions in the economy and prices.


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Goldman's O'Neill Says BOJ Should Increase Rates Regardless of Inflation

(Bloomberg) -- The Bank of Japan should raise
interest rates gradually even if there is no sign of inflation,
said Jim O'Neill, head of global economic research at Goldman,
Sachs Group Inc.

Yields on benchmark 10-year Japanese bonds have climbed more
than a quarter-percentage point since May 17, when BOJ Governor
Toshihiko Fukui said the bank can raise rates even if consumer
prices are falling, as long as it's confident about the outlook
for the economy. A report last week showed growth expanded more
than the government's initial estimate in the first quarter.


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Low yield keeps yen near 4-1/2-yr low vs dollar

(Reuters) - "The basic trend of currencies with prospects of rising interest rates strengthening remains intact," said Nobuo Ibaraki, a forex manager at Nomura Trust and Banking.




The Bank of Japan is also expected to boost interest rates as early as August, but the yen is pressured as interest rate differences with other countries remain wide and keep Japanese investor appetite for higher-yielding foreign assets, he said.


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Yen slides to record low against the euro

(Reuters) - The yen hit a record low versus the euro on Tuesday and was stuck near a 4-1/2-year trough against the dollar as investors kept favouring carry trades funded with the low-yielding Japanese currency. The yen has fallen across the board since Bank of Japan Governor Toshihiko Fukui said late last week he had no preconceived ideas about a future rate rise, dousing expectations of a rate increase in July.

Most market players are looking for the BOJ to raise rates to a 12-year high of 0.75 percent in August, but such a move is not expected to dull the allure of carry trades -- borrowing cheap funds in the yen to buy higher-yielding currencies.


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New Zealand Dollar Near 20-Year High Versus Yen on Appeal of Higher Yields

(Bloomberg) -- New Zealand's dollar traded near the
strongest in almost 20 years against the yen as investors were
attracted to returns from the nation's higher yields.

The currency has gained 31 percent against the yen in the
past 12 months, buoyed by so-called carry trades where investors
borrow yen at lower interest rates to buy higher-yielding assets
elsewhere. The Bank of Japan kept its benchmark rate at 0.5
percent last week, the lowest among major economies and 7.5
percentage points below New Zealand's key rate.


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Yen Trades Near Record Low Versus Euro on BOJ Interest Rate, Carry Trade

(Bloomberg) -- The yen traded near a record low
against the euro on speculation the Bank of Japan will refrain
from accelerating interest-rate increases this year, prompting
investors to buy higher-yielding assets funded by loans in Japan.

Japan's currency sank to the weakest in more than four years
versus the dollar yesterday and a 15-year low versus the British
pound as the nation's lowest interest rates among major economies
encouraged the so-called carry trades. The yen has weakened
versus all 16 most-active currencies since the start of the year.


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Yen Heads for Weekly Loss as Fukui May Signal Only Gradual Rate Increases

(Bloomberg) -- The yen headed for a weekly loss on
speculation Bank of Japan Governor Toshihiko Fukui will signal
plans to raise the overnight lending rate gradually after
leaving it unchanged today.

The yen traded near a 4 1/2-year low against the dollar as
the lowest borrowing costs in the industrialized world spur
investors to take out loans in Japan and buy higher-yielding
assets in so-called carry trades. Fukui will speak today after
policy makers unanimously decided to keep the benchmark rate at
0.5 percent for a fifth meeting.


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JGBs fall on stock rebound, BOJ rate hike concern

(Reuters) - Short-term bonds remained under pressure as investors have
grown wary about an interest rate hike by the Bank of Japan in
the coming months, sending two-year yields to a 10-year high.




"Stock market gains and cheaper U.S. bonds were attracting
investors away from JGBs," said Tetsuya Miura, a bond strategist
at Shinko Securities.


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JGBs edge up,rate worry weighs on short-term bonds

(Reuters) - Industrial production fell 0.1 percent in April from a month
earlier, against a forecast 0.5 percent rise, but traders said
the data failed to reverse mounting expectations for the BOJ to
raise rates as soon August.




"The weak April data alone does not alter the view that the
economy is growing in line with the Bank of Japan's basic
scenario," said Makoto Yamashita, chief JGB strategist at Lehman
Brothers.


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UPDATE 4-Japan consumer prices fall again, but more slowly

(Reuters) - TOKYO, May 25 - The slide in Japanese consumer
prices slowed in April as expected, doing nothing to change the
view that the Bank of Japan is on track to lift interest rates
but that it will have to wait at least until August to do so.




The core consumer price index , excluding fresh food
prices, fell 0.1 percent in April from a year earlier, the third
straight month of year-on-year declines. But it slowed from a 0.3
percent fall in March, data showed on Friday.


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JGBs slide due to fall in Treasuries, Nikkei rise

(Reuters) - Comments by Bank of Japan board member Atsushi Mizuno
reported by Jiji news agency on Tuesday were one factor behind
the weakness in JGBs, said Naomi Hasegawa, a senior fixed income
strategist for Mitsubishi UFJ Securities.




"Mizuno's comments have weighed on short-term bonds, and
Treasury yields rose to 4.8 percent, so sentiment isn't very
good," Hasegawa said.


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Yen May Fall as Bank of Japan Minutes Might Indicate No Change in Rates

(Bloomberg) -- The yen may decline as minutes from a
Bank of Japan meeting last month might show the central bank is
reluctant to accelerate the pace of interest-rate increases.

Policy makers on April 26-27 cut Japan's inflation forecast
to near zero and kept benchmark borrowing costs the lowest among
major nations. A government report on May 24 is forecast to show
consumer prices were unchanged in April. Japan's interest rate,
at 0.5 percent since February, encourages investors to borrow its
currency to fund purchases of higher-yielding assets, a practice
known as the carry trade.


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