JGBs open softer before Tuesday's 10-year sale

Sun Sep 1, 2013 10:07pm EDT

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TOKYO, Sept 2 (IFR) - Japanese government bond prices opened slightly lower on Monday, weighed down by improved capital spending data and caution ahead of Tuesday's monthly 10-year JGB auction.

* In very quiet trading, the new 10-year JGBs (issue number 330, due Sept 2033) are now offered at 0.775 percent on a when-issued basis for the Sept 20 payment date.

* JGB players have to add around 2.5 basis points to yields on the current issue (number 329, 0.8 percent due June 3, 2033) to get those on the new issue (number 330), taking into account a three-month extension of maturity and a 15-day delay in the settlement date.

Judging from the current trading level of the new issue, the Ministry of Finance is expected to set the coupon of the new issue at 0.8 percent, unchanged from last month.

* One large nationwide public pension fund will buy JGBs across the curve on Monday for its turn-of-the-month duration adjustments, while the Bank of Japan is also expected to buy JGBs today under its massive JGB-buying program. Under these circumstances, it seems to be hard for dealers to sell JGBs short aggressively.

* Earlier, the finance ministry published its April-June corporate business survey. The closely-watched April-June capital spending stood unchanged from the same period a year ago, after having fallen for two quarters. April-June capital spending, excluding software, rose 2.9 percent from the previous year, up for the 3rd straight quarter. The data had some negative impact on JGBs amid a rebound in Tokyo stocks and dollar/yen.

* The yield on the current 5-year JGB is indicated at 0.26 percent to 0.27 percent, compared with 0.255 percent last Friday, in the wake of continued weakness in mid-term U.S. Treasuries last Friday.

The yield on the current 10-year bonds is up 1.5 basis point at 0.735 percent, versus 0.74- percent earlier.

In the super-long zone, both the 20-year yield and the 30-year yield are up 1 basis point at 1.65 percent and 1.765 percent, respectively.

JGB futures are down 0.15 point at 144.20, moving in a 144.13-144.26 range.

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