JGBs edge slightly lower in subdued trade

Sun Aug 10, 2014 11:15pm EDT

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TOKYO, Aug 11 (IFR) - Japanese government bond prices were slightly lower on Monday, though above session lows in quiet trading.

Activity was thin as many market participants are taking days off this week for Japan's traditional Obon summer holidays.

In the morning session, domestic real money accounts were largely sidelined, with the Bank of Japan's purchases comprising most of the action.

Under its massive quantitative easing programme, the BOJ offered to buy 400 billion yen ($3.92 billion) of JGBs in the 5-year to 10-year zone, 200 billion yen of JGBs in the 3-year to 5-year zone, and 300 billion yen of JGBs in the 1-year to 3-year zone. The BOJ purchased JGBs in the same zones and amounts on June 4, June 16, June 19, June 25, July 1 and July 28.

One money manager at a large domestic life insurance company told IFR that the reason the yields on the current 10-year and 20-year JGBs have fallen back to their April 2013 levels was because the BOJ had been buying them since that month.

Yields came under further pressure on Friday as U.S. air strikes against Islamist militants in Iraq increased the safe-haven appeal of fixed-income assets. U.S. Treasury yields dropped to 14-month lows.

By midday, the yield on the current 5-year JGBs was up 0.5 basis point from Friday at 0.150 percent, while the 10-year yield was up 0.5 basis point at 0.510 percent, compared with 0.515 percent earlier in the session.

In the superlong zone, the 20-year yield was up 1 basis point at 1.370 percent compared with 1.375 percent earlier on Monday, while the 30-year yield was up 0.5 basis point at 1.680 percent from 1.685 percent earlier.

On Tuesday, the Ministry of Finance will offer 600 billion yen of 30-year JGBs, re-opening the current issue (number 43) for the regular settlement date. JGB investors, therefore, do not need to adjust yields between the current issue and the new one. The average auction yield over the last 12 months was 1.688 percent, while the 30-yield has been moving in a range between 1.645 percent on July 24-30 and 1.725 percent on July 11, with the simple mean at 1.685 percent.

Ten-year lead September JGB futures moved in a narrow 146.06-146.13 range before finishing at midday down 0.05 point at 146.11.

($1 = 102.1600 Japanese yen) (Reporting by Masatsugu Hisatsune; Editing by Jacqueline Wong)

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