Ten-yr JGB yield inches down ahead of U.S. jobs

TOKYO, July 5 Thu Jul 4, 2013 10:28pm EDT

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TOKYO, July 5 (Reuters) - Yields on 10-year Japanese government bonds dipped on Friday, ahead of the release of key U.S. jobs data that could give clues on when the Federal Reserve will start rolling back its stimulus programme.

* The 10-year yield was down 0.5 basis point at 0.855 percent, extending Thursday's drop after a strong 30-year debt auction, although it remained boxed in a range of 0.80 to 0.90 percent over the past five weeks.

* "There is a feeling that it would be dangerous to sell, ahead of events, but at the same time, there is no special reason to aggressively buy," said a fixed-income fund manager at a Japanese trust bank in Tokyo.

"This means the current rangebound trade is likely to continue this month."

* Economists in a Reuters survey forecast a 165,000 jobs were created in June compared with 175,000 jobs created in May, while the unemployment rate is seen at 7.5 percent, versus 7.6 percent the prior month.

* Fed Chairman Ben Bernanke said last month that the U.S. central bank expected to scale back its $85 billion a month bond-buying programme later this year if the economy strengthens.

* Volatility has eased in the JGBs recently after the market was jolted by the Bank of Japan's announcement of a massive bond-buying programme on April 4 to pull the world's third-largest economy out of deflation.

* The 30-day JGB futures implied volatility fell to a two-month low of 3.82 on Thursday. It hit a two-year high of 6.1 on April 12.

* The BOJ on Friday offered to buy 410 billion yen ($4.10 billion) of JGBs in two tranches with residual maturities of up to one year and more than 10 years, as part of its monetary easing steps.

* Ten-year JGB futures added 0.09 point to 142.57 on Friday morning, breaking above their 20-day moving average of 142.53.

* Both the 20- and 30-year yields were unchanged, at 1.725 and 1.845 percent, respectively. Earlier, the 30-year yield fell to one-week low of 1.835 percent to extend the previous session's 5 basis points fall after the 30-year auction.

* The tail between the average and lowest accepted prices for the 30-year bond sale came in at 0.01, shrinking sharply from 0.32 at last month's offering, underscoring demand for the bonds.

* "The fact that tails have nevertheless shortened in recent auctions may suggest an increase in bids premised on an intention to sell to the BOJ over the relatively short term," Barclays Securities wrote in a note.

"But for this to work, there must be an outlook for stable profit with little risk of a large post-auction price drop. More specifically, volatility must be low."

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