JGBs slip, futures pare losses after sharp morning drop

Thu Mar 13, 2014 12:06am EDT

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TOKYO, March 13 (IFR) - Japanese government bond prices slipped on Thursday, while JGB futures briefly fell as much as one point, on what appeared to be a single order, before paring losses.

The Bank of Japan offered to buy a total of 570 billion yen ($5.55 billion) in JGBs in two operations. But the central bank reduced the size of its purchase in the 10-year and longer zone to 170 billion yen from 180 billion yen, after having also cut the size in that zone on Feb 26.

On Wednesday, several corporate pension funds sold 2-year and 30-year JGBs in relatively large lots, probably to use the funds for bargain hunting in Tokyo stocks, JGB traders said. This morning, other investors seemed to have followed suit.

Market participants were seen as reluctant to drive 5-year JGB yields down ahead of Friday's monthly 2.7 trillion sale of 5-year JGBs. The Ministry of Finance will extend the maturity of the issue by 3 months this time, for the first time in 3 months.

In early afternoon, the yield on the current 5-year JGBs rose 1.5 basis points from the previous close to 0.200 percent, while the 10-year yield was up 2 basis points at 0.645 percent.

The 20-year yield added 1.5 basis points to 1.475 percent, while the yield on the 30-year JGB rose 1 basis point to 1.700 percent.

Lead June JGB futures were down 0.17 point at 144.58 in afternoon trade, after finishing the morning at 144.55. At one point in the early session, the contract dropped as low as 143.75, down from a session high of 144.86, in what one market participant said was likely an erroneously placed order.

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