TOKYO Feb 21 Prices on long-dated Japanese government bonds eased on Thursday, ahead of an auction of 1.2 trillion yen ($12.8 billion) worth of 20-year debt.
* The 20-year yield inched up 1 basis point to 1.765 percent, while the 30-year yield put on 1.5 basis points, to 1.940 percent.
* Yuya Yamashita, rates strategist at J.P. Morgan, said he did not expect the auction would see strong demand.
"From the perspective of absolute yield level, it's not that attractive for the usual investors (life insurers)," he said. "But there is a positive factor as well, which is the relative value ... the cheapness of the 20-year sector."
"The first factor should outweigh the second one, so the auction will not be that strong."
* The Ministry of Finance offers a coupon of 1.80 percent, the highest level since March last year.
* "The 20-year/30-year spread has been flattened since December. The pace of flattening has been overly rapid. It will not be a surprise, if we see temporary adjustment of the recent trend," Yamashita said.
* The spread between the 20- and 30-year bonds stood at 17.5 basis points, up from an 8-1/2-month low of 15.5 basis points touched in the previous session.
* Nomura Securities, however, recommend investors holding 20-year debt against 30-year bonds for the long term. "Shifting out of 30s to 20s would result in 3 basis points of positive roll/carry over a six-month period," it said in a note.
* The 10-year yield were unchanged at 0.740 percent, though 10-year JGB futures gained 6 ticks to 144.41.