Benchmark JGBs underpinned by BOJ buying in thin trade

Sun Jan 19, 2014 10:34pm EST

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TOKYO, Jan 20 (IFR) - Benchmark Japanese government bond prices edged up on Monday, supported by the Bank of Japan's asset buying, though activity was thin ahead of the central bank's policy meeting this week.

The BOJ is set to keep monetary policy steady at its two-day meeting beginning on Tuesday, becoming more confident about meeting its price goal on signs a broadening economic recovery may nudge firms into spending more on wages and investment.

The BOJ offered to buy 400 billion yen ($3.8 billion) in five- to 10-year JGBs in the secondary market under its JGB purchase programme.

The BOJ's outright purchases and moderately firmer U.S. Treasuries last Friday ahead of a U.S. holiday on Monday had some positive effect on JGBs through the 10-year zone.

Prices in the superlong zone edged down, as domestic life insurers and pension funds refrained from buying at current levels.

The Japan Securities Dealers Association published its December data on JGB transactions by investor type on Monday. In December, life insurers raised the size of their monthly net purchases back to normal levels in the superlong zone, while megabanks continued to sell medium-term JGBs and domestic bonds.

The data had limited impact on JGBs, as it excludes purchases in JGB auctions and sales under the BOJ purchase programme, according to a few money managers.

At midday, the current five-year JGBs were yet to be priced by JBT, the largest interdealer broker, ahead of Tuesday's monthly 2.7 trillion yen five-year JGB auction.

The 10-year yield fell 1 basis point to 0.660 percent in thin trading, while the 20-year yield inched up 0.5 basis point to 1.545 percent ahead of Thursday's monthly 1.2 trillion yen 20-year JGB auction. The 30-year yield was up 0.5 basis point at 1.705 percent.

Lead March JGB futures moved in a narrow 144.28-144.34 range before finishing midday up 0.10 point at 144.30.

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