Ten-year JGB yield inches up but BOJ buying supports

TOKYO, June 24 Sun Jun 23, 2013 10:16pm EDT

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TOKYO, June 24 (Reuters) - Yields on benchmark 10-year Japanese government bonds edged higher on Monday, tracking sharp selloff in U.S. Treasuries after Federal Reserve Chairman Ben Bernanke's statement the U.S. central bank plans to scale back its stimulus later this year.

* The Bank of Japan's offer to buy 650 billion yen ($6.7 billion) worth of bonds as part of its monetary easing operations to revive the world's third-largest economy helped support JGBs, however.

* The 10-year yield was up 1 basis point at 0.885 percent after trading as low as 0.870 percent and as high as 0.890 percent.

* On Friday, benchmark 10-year U.S. Treasury yields rose to their highest in more than 22 months, marking a miserable week for the bond market as investors fled in the wake of the news from the Fed that it might pare its bond purchases later this year.

The 10-year U.S. Treasury yield rose 41.3 basis points last week, posting the biggest weekly jump since November 2001.

* "The BOJ announcement of its operations is one of the factors," said Yuya Yamashita, rates strategist at JPMorgan in Tokyo.

* Ten-year JGB futures fell 0.12 point to 141.98 after trading as high as 142.24.

* On April 4, the Japanese central bank unveiled the world's most intense burst of monetary stimulus, promising to inject $1.4 trillion into the economy in less than two years to meet its pledge of achieving 2 percent inflation.

* Expectations of month-end buying Japanese pension funds and quarter-end buying by life insurers also supported longer maturities, Yamashita said, adding that investors were also likely to reinvest a large bond redemption this month.

* The 20-year yield eased 0.5 basis point to 1.750 percent, while the five-year yield was unchanged at 0.355 percent.

* "Although 5s have richened slightly versus 10s since May, the basic correlation remains intact, suggesting the low, stable level of short- to medium-term yields will likely continue to contain any rise in 10-year yields to some extent," Barclays Securities wrote in a note.

"If so, JGB long-term yields could be less likely to follow any issue in U.S. yields."

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