JGBs fall, investors take profits ahead of Thursday's 30-yr auction

TOKYO, April 10 Tue Apr 9, 2013 10:20pm EDT

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TOKYO, April 10 (Reuters) - Japanese government debt prices fell on Wednesday ahead of an auction of 30-year bonds this week, with investors locking in profits on sharp gains made after the Bank of Japan announced sweeping stimulus measures.

Yields on benchmark 10-year bonds added 3 basis points to 0.555 percent, hitting a one-week high and pulling further away from a record low of 0.315 percent hit on Friday. Ten-year JGB futures fell 0.08 point to 144.59.

"People, probably banks, are moving away from the 5-year and below sectors, and are trying to put money into the long-end of the curve," said Tadashi Matsukawa, head of Japan fixed-income at PineBridge Investments.

"They haven't done that in a massive way because there is a 30-year auction tomorrow. The market may go down more so they are just waiting to buy cheaply."

The Ministry of Finance is to sell 600 billion yen ($6.1 billion) worth of 30-year bonds on Thursday. It is its first auction of any maturity after the BOJ unveiled on April 4 that it planned to inject $1.4 trillion into the world's third-largest economy in less than two years by buying government bonds across the yield curve as well as riskier exchange-traded funds.

The 30-year yield rose 6.5 basis points to 1.450 percent, although it was still below the level it was trading a day before the central bank announcement.

The 20-year yield gained 4 basis points to 1.335 percent, also still holding below the level the day before the BOJ decision.

"What the BOJ are doing is that they are buying the five- to 10-year sectors. They just completed the first purchase on Monday. Probably they will do another round of purchases on Friday or maybe next Monday," Matsukawa said.

"But eventually after that's done, I think the five- and 10-year sector inventories will dry up. Demand and supply will be tight going into the month-end, so although (prices) are going down now, the market will probably go up after the 30-year auction."

The five-year yield put on 1 basis point to 0.210 percent, a far cry from its record low of 0.095 percent touched on March 4.

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