* Non-German rally stalled by 14 billion euro bond supply
* Yields may resume fall if Asian cash inflows materialise
* Some still sceptical over lasting impact of BOJ stimulus
By William James and Marius Zaharia
LONDON, April 9 (Reuters) - A wave of newly-issued euro zone
bonds offset a surge in investor demand for non-German bonds and
halted a record-breaking rally fuelled by Japan's radical
efforts to stimulate growth.
Japan's central bank unveiled a $1.4 trillion stimulus plan
last week, prompting speculation that cash will spill over into
other regions in search of higher bond yields and assets not
denominated in the rapidly depreciating Japanese yen.
This had helped push French, Dutch, Austrian and Belgian
bonds yields to record lows.
But, with 14 billion euros of newly-sold bonds hitting the
market on Tuesday and some in the market questioning whether the
rally was driven by Asian cash or speculators buying in
anticipation of its arrival, yields lifted off their lows.
Dutch 10-year bond yields were 6 basis points
higher on the day at 1.50 percent, pulling back from last week's
record lows of 1.384 percent after a sale of 20-year government
bonds. Equivalent Finnish bonds were 4 bps higher
on the day at 1.47 percent as the county launched a 4 billion
euro syndicated bond issue.
"The massive rally in Finland, France, Holland looks like it
has stalled out a bit today," a trader said. "My view is that
this is a technical move on the weight of the supply the market
has had to take down today rather than anything fundamental."
An 8 billion euro sale of highly rated bonds from the EFSF,
the euro zone's bailout fund, was also seen draining demand from
secondary markets. Elsewhere, Austria mandated banks for a new
10-year debt issue.
Ten-year German Bund yields rose 2.3 basis points to 1.26
percent while Bund futures fell 28 ticks
Germany is due to auction two-year bonds on Wednesday, and
Italy sells long-term debt on Thursday, but beyond that analysts
said that the rally could still have further to run if Japanese
investors start liquidating their domestic bond holdings.
"I'm a little sceptical on how much is coming through from
Japan and how much is hedge funds and speculative accounts
anticipating the flow," the trader said.
"But, what the BOJ is doing is unprecedented and huge, which
can cause big portfolio shifts and that is certainly the driver
of the price action."
However, some investors were reluctant to buy into the idea
that euro zone bonds will eventually benefit from Japanese
"We haven't got involved in semi-core markets over the past
couple of weeks and it's unlikely that we will," said Sanjay
Joshi, head of fixed income at London and Capital, which manages
$1.5 billion in fixed income assets.
"Certainly ... Japan's (stimulus) option does change the
plan for investors elsewhere as well. But the way I tend to look
at it is that the first (to gain) are (U.S.) Treasuries,
followed potentially by (UK) gilts ... and Canadian and Aussie
bonds before the euro zone."
Joshi said he had recently bought U.S. Treasuries and
Canadian bonds, on the view that Japanese investors would regard
most euro zone bonds as too volatile to prefer them over other