JGBs mostly lower, with next week's 10-yr sale in focus
* BOJ holds steady as expected; sets 2 percent inflation outlook * Superlong tenor outperforms on light dip-buying By Lisa Twaronite and Dominic Lau TOKYO, April 26 (Reuters) - Japanese government bond prices were mostly lower on Friday, as investors looked ahead to a 10-year debt offering during the holiday-shortened week ahead. The superlong tenor fared better as some investors bought on dips, shrugging off the Bank of Japan's semi-annual economic and price report that officially forecast 2 percent inflation during the latter half of the coming three-year period covered by the outlook. "Never say never, but [the 2 percent outlook] seems unlikely. Even if they only get 1 percent, that would be a good result," said Neale Vincent, strategist at Nomura Securities in Tokyo. Government data on Friday showed core consumer prices marked their fifth straight month of annual drops in March even as a recently weaker yen pushed up the cost of imported goods. Japan's central bank also reiterated that it will continue its monetary easing as long as needed to achieve 2 percent inflation in a stable manner. Earlier on Friday, at its regular meeting, the BOJ held monetary policy steady as widely expected. Tokyo markets will be closed for holidays on April 29, and then on May 3 and May 6. On May 1, the Ministry of Finance will offer 2.4 trillion yen ($24.12 billion) of 10-year notes. "Even though the sale is coming in the middle of two long holiday weekends, it should be decent with the BOJ buying so much of that zone. However, there could be some position-adjustment selling in other zones around the sale," said a fixed-income fund manager at a Japanese trust bank. The 10-year yield added 1 basis point to 0.590 percent, staying within this week's trading range of 0.575 to 0.610 percent. Ten-year futures finished down 0.08 point at 144.65 on light volume of 16,676 contracts. The 20-year JGB yield edged down 0.5 basis point to 1.475 percent and the 30-year yield also slipped by that amount to 1.605 percent. Volatility in the JGB market has eased lately after the BOJ announced on April 18 that it would increase the frequency of its government bond purchases to eight times a month from six currently as part of its sweeping stimulus measures unveiled earlier this month. A fixed-income fund manager at a Japanese asset management firm in Tokyo said life insurance companies looked set to keep buying JGBs, despite speculation that the BOJ's massive stimulus would pressure yields and push Japanese investors to seek higher returns overseas. But life insurers' annual investment plans for this fiscal year that began this month suggest that they will make no drastic moves. "The 10-year Treasury yield is almost the same as the superlong sector in yen. If they take into account hedging costs and asset risk, it's not a good investment," he said. "They have to invest in JGBs. They have no choice."
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