Cash Japanese government bonds (JGBs) and bond futures were firmer in late trade on Thursday, overcoming downward pressure after the release of strong machinery orders for May.

The key September ended at 124.89, up from Wednesday's124.84. The yield of the benchmark 182nd 10-year JGB was at 2.285 percent, down from Wednesday's 2.300 percent.

Japan's seasonally adjusted core machinery orders in May grew 12.9 percent month on month. The September eased briefly on the data, but large lot purchases were made during its fall, shoring up the contract by the close.Core machinery orders expanded for the second consecutive month after a 12.7 percent plunge in March. Core orders in May rose 8.8 percent year-on-year after a 6.1 percent decline in April, which was the first year-on-year decline in 19 months. "Many thought JGBs could have gone down further after the (machinery orders) data, but as soon as they found that the September was unwilling to lose much ground, they rushed to tap the market with large bids," said a city bank trader.

"The data seemed to have a reverse impact. The figure was quite good but the market only went down one tick and then reversed back up," a trader at a US brokerage said. There was an unconfirmed rumour the Bank of China bought a portion of Nippon Telegraph and Telephone Corp's 100 billion yen bond.NTT on Tuesday launched 100 billion yen worth of 10-year euroyen bonds due July 25, 2007 with a 2.5 percent coupon at 99.044. The lead-managers are Merrill Lynch and Morgan Stanley. Many investors shunned the issue due to its unattractive terms, traders said, adding the rumour had circulated widely in the market, although it had no immediate impact on JGBs.

Despite the gains on Thursday, the upside of JGBs was cap pedby lacklustre sales of 3.225 percent 20-year straight bonds launched by Tokyo Electric Power Co and Chugoku Electric Power Co on Wednesday, traders said.In the long-end of the market, the recently offered 20-year JGBs with a 3.1 percent coupon also met a poor reception from investors, traders said."The supply/demand balance in the long-end has been quite bad after the recent flood of super long issues in both the government and corporate debt markets," said a brokerage trader.

The lead March Euroyen contract stood at 99.04 at 1115 GMTafter trading a 98.99-99.04 range against an IMM close at 99.00. The trader said the contract should find some support at itsday low, with resistance seen at 99.05 and 99.14.

Dealers said the Tokyo stock market's inability to lift itself out of the doldrums following a spate of bad corporate and Financial sector news was helping underpin Japanese interest rate futures. Eurodollar futures continued to drag their feet due to a dearth of fresh incentives.But dealers said the market looked firmly supported after US treasuries ended at seven-month highs overnight, boosted by bullish sentiment and positive technicals.

December Eurodollars ended at 94.065 against an IMM close at 94.070 on volume of 3,400 lots.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.