Benchmark JGBs edge down, BOJ purchases support market

Tue Aug 19, 2014 11:31pm EDT

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TOKYO, Aug 20 (IFR) - Benchmark Japanese government bond prices edged slightly down on Wednesday in quiet trade, while other tenors were steady as buying by the Bank of Japan supported the market.

As widely expected, the BOJ offered to buy 300 billion yen (2.91 billion US dollar) of JGBs in the 1-year to 3-year zone; 200 billion yen in the 3-year to 5-year zone; 100 billion in the 10-year to 25-year zone, including the new 20-year JGBs (issue number 149); and 30 billion yen in the 25-year to 40-year zone.

The zones and amounts of BOJ buying were largely in line with market expectations. Under its JGB purchase program begun in April 2013, the BOJ has never failed to buy superlong JGBs on the trading days following 20-year, 30-year and 40-year JGB auctions.

Several pension funds and regional banks sold 5-year to 7-year JGBs to shift into superlong JGBs to earn extra income. Some market participants also expect index-linked funds to buy superlong JGBs next week for their month-end duration adjustments in addition to the BOJ's buying operations.

At midday, the yield on the current 5-year JGBs was unchanged from Tuesday at 0.150 percent, while the benchmark 10-year yield inched up 0.5 basis point to 0.500 percent.

The yield on the new 20-year JGBs (re-opened issue number 149) was flat at 1.340 percent, compared with the 1.342 percent average accepted yield in Tuesday's monthly 1.2 trillion yen 20-year JGB auction.

In the longer-dated zone, the 30-year yield was flat at 1.650 percent, while the 40-year yield was flat at 1.790 percent ahead of next Tuesday's quarterly 400 billion 40-year JGB auction to re-open the current issue (number 7).

In the morning session, 10-year lead September JGB futures moved in a 146.13-146.22 range before finishing at midday down 0.06 point at 146.13.

The JGB market largely shrugged off trade data released in the morning that showed Japan's exports rose in July for the first time in three months, in a tentative sign that overseas demand is starting to recover.

(1 US dollar = 102.9400 Japanese yen) (Reporting by Masatsugu Hisatsune; Editing by Simon Cameron-Moore)

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