JGB largely steady, govt sells inflation-link bonds

TOKYO Wed Jan 8, 2014 9:58pm EST

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TOKYO Jan 9 (Reuters) - Japanese government bond prices were largely steady on Thursday, even though Tokyo's stocks came under pressure, while the country was to sell its second inflation-linked bonds since 2008.

The 10-year yield edged up 0.5 basis point to 0.705 percent, while the 10-year JGB futures were largely unchanged at 143.72.

Tokyo's Nikkei stock average dropped 1.3 percent in relatively active trade on Thursday morning after rising sharply on the previous day, as investors stayed risk averse before the release of U.S. nonfarm payroll data on Friday.

The finance ministry was to sell 300 billion yen of inflation-linked 10-year JGBs with a 0.1 percent coupon later in the day.

This marked the second such issue since 2008. In October, the government sold 300 billion yen of 10-year inflation-linked JGBs with strong demand.

Japan suspended issue of inflation-linked bonds in 2008, when the global financial crisis threw the country back into deflation and caused massive losses on inflation-linked JGBs.

"Valuations do not look particularly cheap and seasonality will work against the issue, but auction results should be solid given the external environment - yen depreciation and stronger-than-expected CPI inflation," Barclays wrote in a note, referring to the latest offer.

The Bank of Japan aims to achieve a 2 percent inflation in two years, when it stunned the financial markets in April by promising to inject $1.4 trillion into the economy to spur growth.

BOJ board member Sayuri Shirai said it may be desirable to take more than two year to achieve the central bank's inflation target if the burden on households and the corporate sector proves to be excessive, according to a speech released on Thursday.

The 30-year yield was down 0.5 basis point at 1.695 percent, while the 20-year yield was unchanged at 1.535 percent.

The short-dated five-year yield inched up 0.5 basis point to 0.220 percent.

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