NEW YORK (CNNfn) - A rebounding Japanese yen and what could be a rising stock market sent bond prices lower Friday after strong gains in the previous day's session.
The long bond, which enjoyed a flight to quality Thursday as stock prices plunged, fell slightly at the open of U.S. trading Friday. The 30-year benchmark Treasury was off 10/32 in price for a yield of 5.67 percent.
Stocks appeared on the way back up Friday, possibly siphoning off some of the bond gains.
The Japanese yen rose to 140.39 against the dollar after the ruling Liberal Democratic Party selected Foreign Minister Keizo Obuchi as its new leader, setting him up to be named prime minister.
Many analysts have suggested Obuchi's accession will simply mean more of the same, rather than heralding the aggressive reform tack many say is necessary to pull Japan out of its market slump.
But one key bond market watcher is optimistic.
"Two good things have happened in Japan," said David Jones, chief economist at Aubrey G. Lanston. "We've overcome the uncertainty of who the leader's going to be; and secondly, they are listening to the markets, in terms of permanent tax cuts, in terms of banking reform."
"Now, we have to see how the rubber hits the road," he added.
Other analysts suggested debate now centers on who will join an Obuchi cabinet as finance minister and set the tone for economic policy.
"We still have to wait for the cabinet ministers," said Matthew Alexy, chief market strategist at CS First Boston. "If [chief cabinet secretary Seiroku] Kajiyama is part of the team as finance minister, that may be a situation where we may see improvement in Japan's announcements."
"The bottom line is, there are a lot of smart people working to try to fix Japan," he said.