Long-dated JGB yields up after liquidity operations

Thu Oct 31, 2013 11:59pm EDT

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TOKYO, Nov 1 (IFR) - Japanese government bond prices largely held steady on Friday, though longer-maturities underperformed after an auction of 300 billion yen ($3.1 billion) of old 20- to 40-year debt in an liquidity enhancement operation.

In quiet trading, seven-year to 20-year JGBs recovered most of their earlier losses into the morning close, while 30-year and 40-year JGBs remained modestly weaker.

Several regional banks have been selling domestic high-grade non-JGB bonds for the last several sessions, as JGB yields have fallen to a low of nearly six months.

Continued selling of corporate, utility, municipal and agency bonds has weighed on the bond market, widening their yield spreads over JGBs steadily, according to a few money managers at domestic regional banks.

Meanwhile, a few megabanks were seen buying long-term and super-long JGBs sporadically in thin trading, or receiving the 20s in the interest-rate swap market.

Dealers were also adjusting positions ahead of a long holiday weekend. Japan's financial markets will be closed on Monday for a national holiday.

The current 10-year yield was unchanged at 0.59 percent, ahead of next Wednesday's monthly 2.4 trillion yen auction of similar maturities.

The 20-year yield rose 1 basis point to 1.495 percent, while the 30-year yield also rose 1 basis point, to 1.635 percent.

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