JGB 10-year yield slips, superlongs underperform ahead of 40-yr auction
* Ten-year JGB yield falls 1 basis point
* Longer-dated bond yields up 1.5 to 2.5 bps
TOKYO Aug 15 (Reuters) - Yields on benchmark Japanese government debt neared a three-month low on Thursday, though superlong maturities underperformed as some market players put on steepening trades ahead of a 40-year bond sale next week.
The 10-year yield slipped 1 basis point to 0.740 percent, just shy of a three-month low of 0.730 percent touched on Tuesday. The five-year yield dipped 0.5 basis point to 0.275 percent.
The 20-year yield rose 1.5 basis point to 1.675 percent, while the 30-year yield was up 2.5 basis points at 1.800 percent. Both maturities hit a two-month low on Tuesday.
"It seems that someone is starting to buy short-end, or the 10-year sector, and selling the long-end of the curve as part of the steepening trade," said Tadashi Matsukawa, head of Japan fixed income at PineBridge Investments.
"Ahead of the 40-year auction, I think that makes sense. The BOJ purchased (JGBs) on Monday and Wednesday. They came in twice ... The next time they will come in is probably after the 40-year auction," he said, adding that those investors were likely to keep their steepening trades on until after the debt sale.
The Ministry of Finance is to sell 400 billion yen ($4.1 billion) worth of 40-year bonds on Tuesday.
Ten-year JGB futures rose 0.09 point to 144.03, not too far from a three-month peak of 144.24 hit on Tuesday. Trading volume was relatively light, with 13,943 contracts changing hands, the sixth lowest so far this year.
The 10-/30-year spread rose to 106 basis points, off a two-week low of 102 basis points reached on Tuesday, while the spread between 10- and 20-year yield was at 93.5 basis points, also up from a two-week trough hit on Aug. 13.
Meanwhile, the spread between 10-year JGB yield and the Topix share index's dividend yield fell to a one-week low of 0.934 percentage points on Wednesday after hitting a two-month high of 0.99 percentage points on Monday, according to Thomson Reuters Datastream.
It hit a two-year low of 0.654 percentage points on May 22, a day before the index plunged 6.9 percent - its biggest slide since the March 2011 earthquake and tsunami.
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