JGBs slip as stocks erase early losses; 20-year sale eyed

TOKYO, June 17 Sun Jun 16, 2013 10:47pm EDT

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TOKYO, June 17 (Reuters) - Japanese government bonds began the week on shakier footing on Monday, with the benchmark yield edging higher as stocks rose and investors positioned for this week's 20-year sale.

* The 10-year yield added 3 basis points to 0.845 percent after rising as high as 0.855 percent. It remained in its recent trading range of 0.80 to 0.90 percent, well shy of a 13-month high of one percent hit on May 23.

* The Bank of Japan's operations under its asset-buying stimulus scheme underpinned prices. On Monday, the central bank offered to buy 100 billion yen ($1.06 billion) of JGBs with one to three years left to maturity, and another 400 billion yen of JGBs with a three to five year maturity profile.

* The 10-year futures contract ended morning trade down 0.17 point at 142.63, turning negative after the Nikkei stock average reversed early losses on buying in defensive shares.

* Prices on superlong maturities also fell ahead of Tuesday's 20-year auction. The 20-year yield added 1.5 basis points to 1.685 percent and the 30-year yield added 1 basis point to 1.805 percent.

* Sentiment in the JGB market improved sharply on expectations that the U.S. Federal Reserve will keep short-term interest rates low, the latest weekly Thomson Reuters poll showed on Monday.

Fed policymakers will hold a regular meeting on Tuesday and Wednesday this week. JGB yields often track Treasury yields, so Japanese investors will watch for any signs the U.S. central bank is set to taper its asset-buying stimulus.

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