JGBs rise after better-than-expected 30-year sale
* Bid-to-cover at 30-yr auction was highest since Jan 2011
* 10-yr, 3-yr yield spread hits highest since March 2008
By Lisa Twaronite
TOKYO, Oct 11 (Reuters) - Japanese government bonds rose for the third session on Thursday, after a 30-year sale generated strong demand and as slumping stocks increased the appeal of fixed income assets.
The Ministry of Finance offered 700 billion yen ($8.9 billion) of 30-year bonds with a coupon of 1.90 percent, matching that of the previous sale.
It sold the bonds at a lowest accepted price of 99.30 to yield 1.936 percent. The bid-to-cover ratio was 5.10, topping the previous sale's 4.46 and the highest since January 2011. The tail between the average and lowest accepted prices shrank to 0.04 from 0.1 at the last offering.
"I think the result was better than expected," said Naomi Muguruma, senior strategist at Mitsubishi UFJ Morgan Stanley Securities.
"Right after the auction result, I think the market was more or less taking a wait-and-see stance, but since the Nikkei remains weak and some follow-through purchases came in, it tested the upside," she said.
The Nikkei share average dropped 0.6 percent to its lowest close in more than two months on fears of weaker corporate earnings.
A 20-year JGB sale next Thursday will provide the next test of the market's appetite for superlong tenors.
"We'll see if investors come in and buy JGBs ahead of that sale in the wake of the stronger auction result today," Muguruma added.
The yield curve had steepened this week ahead of the auction as investors sold to make room in their portfolios to buy at the sale.
Ahead of the auction results, the spread between the 10-year and 30-year yields rose to 1.17 percentage points, its widest since March 2008.
The benchmark 10-year yield shed 1 basis point to 0.755 percent, matching an eight-week low touched last week.
Ten-year JGB futures ended up 0.15 point at their session high of 144.33.
Yields on 30-year debt were flat at 1.925 percent after rising as high as 1.940 percent before the auction results were announced, while those on 20-year bonds fell half a basis point to 1.650 percent, down from a high of 1.660 percent.
As representatives from the International Monetary Fund gathered in Tokyo for a regular meeting, the IMF prodded the world's rich countries for swifter action on Thursday as Europe's debt crisis drags on while the United States and Japan show scant progress handling their budget deficits.
Undermining demand for risk assets, the IMF cut its global growth forecast this week for the second time since April.
Japanese Finance Minister Koriki Jojima said Thursday that the government might have to take fiscal stimulus measures to support the economy in the near-term, though he said it would strive to keep its pledge to restore fiscal health.
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