JGBs steady, 20-year tenor firms after solid auction

Wed Jul 23, 2014 12:41am EDT

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TOKYO, July 23 (IFR) - Twenty-year Japanese government bonds outperformed on Wednesday after an auction pointed to growing demand for that tenor.

The Bank of Japan refrained from offering to buy JGBs under its asset-purchase programme, as it does when the Ministry of Finance conducts sales.

MOF offered 1.2 trillion yen ($11.83 billion) of 20-year bonds, reopening the current issue (number 149 with a coupon of 1.5 percent due June 20, 2034) for the regular settlement date of July 25. JGB players, therefore, did not need to adjust yields between the current issue and the new one.

The 20-year JGBs sold at a lowest price of 101.35 to yield 1.413 percent, slightly better than expected. The bid-to-cover ratio improved to 3.77 from 2.71 at the previous 20-year sale.

The BOJ is widely expected to buy 100 billion yen of 10-year to 25-year JGBs in its purchase operations on Thursday, according to a few corporate pension fund managers.

After the sale, the 20-year yield slipped 1 basis point on the day to 1.395 percent, down from an earlier high of 1.405 percent. It moved back toward last Friday's low of 1.350 percent, which was its lowest level since April 2013.

The yield on 30-year JGBs was up half a basis point at 1.680 percent, down from an earlier high of 1.690 percent.

The yield on the benchmark 10-year JGB was flat at 0.535 percent, down from 0.540 percent earlier in the session.

Ten-year lead September JGB futures gained after the 20-year sale results were announced, rising 0.07 to 145.92, after finishing the morning session at 145.84.

The JGB market had a muted reaction to comments from BOJ Deputy Governor Hiroshi Nakaso, who said in a speech to business leaders in Shizuoka, eastern Japan on Wednesday that country was eyeing an end to deflation but warned of the need to pay due heed to the slow pace of recovery in exports. ($1 = 101.4100 Japanese Yen) (Reporting by Masatsugu Hisatsune; Editing by Kim Coghill)

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