JGBs supported, helped by investors' portfolio rebalancing

TOKYO Mon Feb 11, 2013 9:38pm EST

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TOKYO Feb 12 (Reuters) - Japanese government bonds were mostly supported on Tuesday as longest maturities outperformed partly on buying from investors rebalancing their portfolio after sharp gains in Japanese equities.

* The market, particularly at the short end, was also bolstered by expectations that the Bank of Japan is likely to step up its monetary easing in coming months.

* The 30-year bond yield fell 1.5 basis point to 1.975 percent, outperforming shorter maturities while the 20-year bond yield fell 0.5 basis point to 1.770 percent .

* Some passive fund mangers appeared to be buying bonds as recent gains in Japanese shares prices made their portfolio too overweight on stocks, said Naomi Muguruma, senior strategist at Mitsubishi UFJ Morgan Stanley Securities.

* Japan's Nikkei share average has risen almost a third since mid-November. On Tuesday it climbed 2.4 percent to edge near its 33-month high as the yen weakened after a U.S. Treasury official voiced support for Japan's aggressive policies to combat deflation and boot growth.

* The strength of "superlong" bonds also pointed to the market's optimism on an auction of 400 billion yen ($4.25 billion) 40-year JGBs on Wednesday.

* Short-term note yields were stuck at historic lows, with the five-year yield flat at its record low of 0.135 percent .

* On the other hand, the 10-year bond yield rose 0.5 basis point to 0.760 percent as banks took profits in that tenor, ahead of their annual book-closing at the end of March.

* The 10-year JGB futures price also fell 0.05 point to 144.17.

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