Money markets and JGBs came under offers after Dec posted a current account balance below expectations at Y 303.5bn (mkt: Y 340.1bn), ending 2011 with a CAB surplus 43.9% lower compared to 2010, it's first slide in 2 years.
Yields on the 10Ys rose 1bp to 0.980%. The shorter and longer ends of the curve also came under selling pressure with yields on 5 years +0.5bp to 0.340%; 20s and 30s rose 0.5 and 1bp to 1.740% and 1.915% respectively. Mar-12 contracts broke the 142.49 support to 142.38. The Nikkei gained on the slipstream of positive news that Greek was finalizing debt talks with private sector creditors, aided by bids in exporter stocks following the weaker yen. USD/JPY traded around 77 while EUR/JPY around 102.00. The Nikkei hovers around 9000 at time of writing.
However, rumors that Greece is preparing to leave the eurozone is a jarring red flag. We advise against chasing domestic stocks higher at this point on the potentially steep downsides at this stage. Even were the rumors unsubstantiated, Japan's economy remains plagued by weak growth, a sluggish labor market and bleak earning forecasts. Preference is for short equities and square on bonds. GS