JGBs steady, 40-year auction in focus
TOKYO Aug 19 (Reuters) - Benchmark Japanese government bonds were steady on Monday, supported by domestic demand but hamstrung by soaring Treasury yields and uncertainty about the U.S. Federal Reserve's next policy move.
* The Bank of Japan's offer to buy outright in its asset-purchase operations 2 trillion yen ($20.50 billion) of treasury discount bills provided some support to the market.
* But sagging Treasuries undermined sentiment toward fixed-income assets. Yields on 10-year Treasury debt were up near two-year highs at 2.85 percent, as investors positioned for the likelihood that the U.S. central bank will begin tapering it $85 billion-a-month in asset purchases as early as September.
* The yield on the benchmark 10-year note was flat at 0.755 percent, holding a three-month low of 0.730 percent hit last week, and edging down from an intraday high of 0.760 percent.
* Ten-year JGB futures ended morning trade down 0.01 point at 143.83.
* On Tuesday, the Ministry of Finance will hold a quarterly auction of 400 billion yen of 40-year bonds, and will offer 20-year bonds on Aug. 27. While those sales could bring supply pressure, scattered dip-buying supported the superlong tenor on Monday.
* The yield on 20-year debt slipped 1 basis point to 1.675 percent and the 30-year yield fell half a basis point to 1.805 percent.
* "Japan is still facing uncertainties, but we foresee an end to the recent trend of stock weakness and yen gains over the next 1-2 weeks and upside resistance in the JGB market," strategists at RBS Japan wrote in a note to clients on Monday.
"We advise investors to wait until the midsummer strong-yen nightmare dissipates, similar to the heat wave," they added.