JGBs fall after data continue easing economy worries

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Friday September 03, 2010 04:27:01 PM GMT

TOKYO, Sept 3 (Reuters) - Japanese government bonds fell on Friday, with the benchmark 10-year yield touching a seven-week high, as stronger-than-expected U.S. housing data added to this week's list of indicators that have eased worries about the global economy.

* The JGB market's drop is part of a recent phenomenon of government bonds including U.S. Treasuries and German Bunds retracing previous strong rallies as this week's data suggested that pessimism towards the global economy was perhaps overdone.

* Data on Thursday showed stronger-than-expected U.S. pending homes sales in July and a second week of lower initial claims for unemployment benefits, reinforcing the upbeat mood initiated by robust China and U.S. manufacturing numbers released earlier in the week.

* The market is wary of a steepening of the curve -- which until recently had flattened partly on the fiscal austerity stance of Prime Minister Naoto Kan's government -- if the prime minister's post goes to Ozawa, known for his apparent propensity to spend and as a proponent of easy monetary policy.

* Market players expect a wait-and-see mood to take hold ahead of closely watched August U.S. employment data due later on Friday, seeking clues on whether they enhance or dampen recent economic optimism that has warmed investor demand for risky assets such as equities.

* The median of forecasts from economists polled by Reuters is for an overall payrolls contraction of 100,000 after employers shed 131,000 jobs in July. The forecast for private payrolls is a 41,000 increase after an increase of 71,000 in July.

* September 10-year JGB futures fell 0.15 point to 142.06. The benchmark 10-year JGB yield rose 2 basis points to 1.130 percent, a seven-week high. It is on track to rise 11.5 basis points on the week, the biggest weekly jump since January 2009. (Reporting by Shinichi Saoshiro; Editing by Edmund Klamann)

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