JGBs edge down ahead of offering of 5-year notes

TOKYO, April 17 Mon Apr 16, 2012 10:41pm EDT

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TOKYO, April 17 (Reuters) - Japanese government bond prices edged down on Tuesday on selling ahead of an auction of five-year notes, combined with profit-taking after yields hit fresh lows in the previous session.

* The yield on the latest 10-year notes rose 1 basis point to 0.940 percent, after hitting a 17-month low of 0.930 percent on Monday.

* June 10-year JGB futures edged down 0.07 point to 142.62.

* The finance ministry is offering 2.5 trillion yen of reopened five-year JGBs with a 0.3 percent coupon. The coupon rate is above the current yield on the five-year cash bond , which was up 1 basis point at 0.295 percent.

* "Even with the cash yield below the offered coupon, demand at the auction should be decent. Banks are going to be buyers, and there will be dealer short-covering," said a fixed-income fund manager at a Japanese asset management firm in Tokyo.

* Five-year notes have outperformed since the Bank of Japan's eased policy on Feb. 14 by expanding its asset buying programme. The BOJ buys bonds with up to two years left to maturity, and many market participants expect the maturities to be eventually extended to five years.

* Sources have said the BOJ could ease again at its next meeting on April 27, by increasing government bond purchases under its 65 trillion yen asset-buying and loan programme.

* The 30-year JGB yield added half a basis point to 1.900 percent, after it fell as low as 1.890 percent in the previous session, its lowest level since Feb. 20.

* The 20-year JGB outperformed, with its yield slipping 1 basis point to 1.710 percent. In the previous session, it retraced Friday's low of 1.705 percent, which was its lowest level since Feb. 3.

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