JGBs edge lower, taking cue from Nikkei rally

Wed May 21, 2014 11:06pm EDT

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TOKYO, May 22 (IFR) - Japanese government bond prices ended the morning session modestly lower on Thursday, as rallying equities undermined the appeal of safe-haven fixed income assets.

The Nikkei share average rose sharply as a survey showing an encouraging improvement in Chinese manufacturing added to an already upbeat mood after the U.S. Federal Reserve reaffirmed its commitment to support the economy. The Nikkei was up 1.6 percent at the end of the morning session.

The cash JGB market was very quiet as both investors and dealers remained reluctant to take large positions ahead of the results of this session's monthly 400 billion yen ($3.94 billion) liquidity enhancement auction for off-the-run 10-year and 20-year JGBs at 0345 GMT.

As widely expected, the Bank of Japan did not offer to buy JGBs in its asset purchase programme, as it typically refrains on days when the Ministry of Finance conducts JGB auctions.

At midday, yields on the current 10-year, 20-year, and 30-year JGBs were all up 0.5 basis point from Wednesday at 0.595 percent, 1.45 percent, and 1.69 percent, respectively.

Ten-year lead June JGB futures moved in a narrow 145.14-145.21 range before finishing the morning session down 0.04 point at 145.18.

($1 = 101.4950 Japanese yen) (Reporting by Masatsugu Hisatsune; Editing by Jacqueline Wong)

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