JGBs firm, tracking Treasuries as Boehner drops �cliff� plan

TOKYO, Dec 21: Japanese government bonds erased losses on Friday, with benchmark yields dropping from a 7-week high in line with rallying US Treasuries after Speaker of the US House of Representatives John Boehner said his tax bill aimed at solving the US �fiscal cliff� budget impasse lacked the votes to pass.The US news prompted investors to seek safe-haven assets, lifting benchmark US 10-year Treasuries and pushing down their yields.The 10-year JGB futures contract ended morning trade up 0.02 point at 144.03, after earlier dropping as low as� 143.86.Yields on cash 10-year JGBs fell half a basis point to 0.765 percent, after earlier rising as high as 0.780 percent. That matched Wednesday�s high, which was their loftiest level since Nov. 2.�It�s all the US story now,� said Shogo Fujita, chief Japan bond strategist at Bank of America Merrill Lynch.�The Japanese story is pretty much over, with the Japanese elections and the BOJ. Everything is on the �cliff� now,� he said.On Thursday, the BOJ expanded its asset-buying and lending programme (APP) by 10 trillion yen ($119 billion) to 101 trillion yen, an expected easing move against a backdrop of rising political pressure.Shinzo Abe, the country�s next leader after his Liberal Democratic Party�s landslide in Sunday�s elections, has called on the bank to boost efforts to take more aggressive steps to beat deflation.The superlong sector outperformed as Japanese life insurers bought in that zone, market participants said.�Life insurance companies had to buy anyway, and they�re buying on top of the �cliff� story.� They were waiting for a time to do it,� Bank of America Merrill Lynch�s Fujita said.Yields on 20-year bonds fell 1 basis point to 1.720 percent, while those on 30-year bonds lost 2 basis points to 1.945 percent.Japan�s financial markets will be closed on Monday in observance of the Emperor�s birthday, and many markets around the world close on Tuesday for Christmas. (AGENCIES)