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JGB futures end higher, buoyed by retailer failure

TOKYO: Japanese government bond (JGB) futures ended higher in Tokyo, as failure of a mid-sized Japanese retailer led more market participants to believe the Bank of Japan would not end its zero interest rate policy any time soon. Nagasakiya Co Ltd filed for court protection from creditors at Tokyo District Court on Sunday with total debts of 303.9 billion yen. But key March 10-year JGB futures pared gains on profit-taking before close, as operators were wary about pushing prices up too aggressively ahead of next week's 10-year JGB auction. March contract: closed up 0.31 at 132.23, after earlier rising as high as 132.51. Yield of 220th 10-year JGB at 1.830 percent, down from 1.860 percent late on Thursday. Weak Tokyo share prices also underpinned JGBs. Nikkei average ended down 0.78 percent at 19,556.46.Questions about Japan's economic recovery were triggered by news on Sunday that medium-sized supermarket company Nagasakiya Co Ltd had filed for court protection from its creditors under the nation's bankruptcy laws.

"Nagasakiya's failure led the market to think that a rise in interest rates would be unlikely in the immediate future," a Japanese commercial bank dealer said.

The ailing retailer was saddled with a total of 303.9 billion yen in debt.

That news and a fall on Wall Street on Friday weighed on Tokyo share prices, which closed the morning session down 75.25 at 19,634.77.

Traders said the stock market's weakness had provided psychological support to the bond market.

Fluctuations were expected to be small for the rest of the day as a tighter supply due to the absence of JGB auctions this week was also expected to provide support to the market.

The market was looking for incentives from Bank of Japan (BOJ) Governor Masaru Hayami, who was in parliament to answer questions until 2:45 p.m.

The Finance Ministry said on Monday that net purchases of foreign bonds by Japanese investors, based on settlements, totalled 8.5642 trillion yen in calendar 1999, compared with 9.4645 trillion yen in 1998.

The BOJ left the money with a fund surplus of 1.0 trillion yen on Monday, unchanged from Thursday's levels.-Reuters