JGBs sag on long end after strong Japan economic data

Wed Jan 15, 2014 10:48pm EST

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TOKYO, Jan 16 (IFR) - Japanese government bond prices ended the morning session lower on Thursday, with the 10-year/20-year yield curve steepening by 1 basis point from the previous session after upbeat economic data.

Japan's core machinery orders jumped in November for the second straight month of gains, a sign companies may ramp up investment to meet strong domestic demand and boding well for Prime Minister Shinzo Abe's efforts to revive the economy.

Bank of Japan Governor Haruhiko Kuroda maintained his upbeat view on the economy, saying it is expected to continue a moderate recovery despite the likely pain from a sales tax hike in April.

JGB market sentiment was also subdued after U.S. stock prices continued to rise overnight, shrugging off a continued rise in U.S. Treasury yields, with the Standard & Poor's 500 index closing at a record high overnight.

In the morning session, the yield on the new 30-year JGBs , a re-opening of issue #41, rose by 1.5 basis points to 1.685 percent, compared with 1.672 percent for the highest accepted yield in Wednesday's monthly 30-year JGB auction.

The 20-year sector weakened more than the 30-year sector, driving the 20-year yield up 2 basis points to 1.530 percent.

Domestic pension funds and life insurers took a wait-and-see stance despite this morning's BOJ purchases of 200 billion yen ($1.91 billion) in JGBs maturing in more than 10 years.

In the mid- to long-term zone, 5-year notes are yet to be priced actively among brokers ahead of next Tuesday's monthly 5-year JGB auction. The yield on 10-year JGBs was up 1 basis point at 0.670 percent in thin trading.

Lead March JGB futures moved in a 144.17-144.23 range before finishing the morning session down 0.05 point at 144.17.

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