TOKYO Jan 24 Japanese government bonds fell on Thursday as investors made room on their portfolios to buy at the session's auction of 20-year bonds.
* The Ministry of Finance is offering 1.2 trillion yen of 20-year bonds, reopening the number 141 issue with a 1.7 percent coupon, matching that of the past four sales.
* The yield curve reversed some of the previous session's flattening, with the 20-year zone underperforming ahead of the sale.
* "The concern about new issuance has faded, and the latest Bank of Japan move is out of the way, so I expect to see a smooth sale," said a fixed-income fund manager at a Japanese asset management firm in Tokyo.
* The 20-year yield added 2 points to 1.750 percent, though the 30-year bond yield added just half a basis point to 1.960 percent.
* "Now that near-term events with potential to worsen supply and demand in the superlong end are out of the way, it is arguably an easy time to buy 20s," strategists at Barclays wrote in a note to clients on Thursday.
* On Tuesday, the BOJ doubled its inflation target to 2 percent, and announced it will make open-ended asset purchases beginning in 2014 and will expand the central bank's balance sheet by a relatively modest 10 trillion yen ($114 billion).
While the timing and the amount disappointed investors who hoped for more immediate, substantial purchases, market participants said the central bank's commitment to fight deflation underpinned bonds and raised expectations that more easing steps lie ahead.
* Bonds were also underpinned by data on Thursday showing Japan logged a record annual trade deficit in 2012 as exports continued to slide in December.
* The 10-year JGB yield added 1 basis point to 0.740 percent, while the benchmark 10-year JGB futures ended morning trade down 0.02 point at 144.35, edging further away from a nearly six-week intraday high of 144.57 hit on Tuesday.