JGBs slips after encouraging U.S. data, 10-yr yield off 3-month low
TOKYO Aug 14 (Reuters) - Japanese government bond prices eased on Wednesday, with the 10-year yield coming off a three-month low, tracking weakness in U.S. Treasuries after encouraging U.S. retail sales data and signs that Europe's economy is starting to turn around.
* The benchmark 10-year yield added 2 basis points to 0.750 percent after hitting a three-month low of 0.730 percent on Monday, while the 10-year futures dipped 0.11 point to 144.03, breaking below their five-day moving average of 144.05.
* U.S. retail sales excluding cars, gasoline and building materials rose 0.5 percent in July, the largest increase since December, while Germany's ZEW investor sentiment survey came in better than expected.
* Comments from a top Federal Reserve official that he would not rule out the possibility that the U.S. central bank might reduce its $85 billion monthly bond-buying programme in September also weighed on U.S. Treasuries, with the 10-year yield nearing a 23-month high touched last month.
* "If the 10-year U.S. Treasury yield stays at around 2.7 percent or seeks a higher range, then it will be possible for the JGB yield to shift to the 0.80-percent area," said Maki Shimizu, senior JGB strategist at Citigroup.
But she said many JGB players had retreated from the market and had not accumulated sizable positions recently, so they may not have a lot to sell, while the Bank of Japan's bond-buying operation was also a powerful influence on the market.
* On Wednesday, the BOJ offered to buy 700 billion yen ($7.1 billion) worth of JGBs with residual maturities of one to more than 10 years, as part of its aggressive monetary easing to revive the world's third-largest economy.
* The 30-day implied volatility on JGB futures slipped to a three-month low of 2.54 on Tuesday, way off a two-year peak of 6.1 reached on April 12 as market participants struggled to adapt to the BOJ's radical easing scheme announced on April 4. The latest data will be available later on Wednesday.
* The five-year yield was up 0.5 basis point at 0.275 percent, giving back some of the previous session's 1.5-basis point drop after a strong five-year auction result.
* Yields on longer-maturities also rose, with both the 20- and the 30-year sectors up 1.5 basis points at 1.655 and 1.770 percent, respectively. They hit a two-month low on Tuesday.
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