JGBs mostly lower ahead of 30-year auction

Tue Jan 14, 2014 10:29pm EST

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TOKYO, Jan 15 (IFR) - Japanese government bond prices edged lower on Wednesday morning as investors positioned for this session's sale of 30-year bonds.

Trading volume in both cash and futures markets was limited as many domestic real money accounts did not chase higher prices after the previous session's gains. A rise in U.S. Treasury yields, stock prices and dollar/yen overnight also pushed JGB yields slightly higher.

A few domestic corporate pension fund managers said that they would buy more superlong JGBs, depending on the results of Wednesday's monthly 30-year JGB auction.

The Ministry of Finance reopened the current issue for the regular settlement date in the latest sale. Since the beginning of October, the spread between 10-year and 30-year yields has been moving between 97.5 basis points several times in October, and 106.5 basis points on Dec. 17. It was at 100.5 basis points on Wednesday.

The 20-year/30-year yield spread has been moving between 12 basis points on Oct. 10 and 20.5 basis points on Dec. 17, and is now at 15 basis points.

The average 30-year auction yield for the 10 auctions over the past year was 1.74 percent. In the previous session, the yield on the current 30-year JGBs fell 2.5 basis points to 1.665 percent, moving away from Dec. 30's high of 1.74 percent, which was its highest level since Dec. 16's 1.75 percent.

According to JGB traders, some bearish corporate pension funds sold five-year to seven-year JGBs on Tuesday to shift into two-year JGBs.

At midday on Wednesday, the yield on the current five-year JGBs was up 1 basis point at 0.20 percent, while the 10-year yield was up 1 basis point at 0.66 percent.

In the superlong zone, the 20-year yield was up 1.5 basis points at 1.515 percent, while the 30-year yield was flat at 1.665 percent after touching 1.675 percent earlier.

Lead March JGB futures moved in a 144.16-144.29 range before finishing midday down 0.10 point at 144.24.

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