JGBs mostly edge higher, buoyed by U.S., European debt gains

Wed Aug 27, 2014 10:58pm EDT

TOKYO, Aug 28 (IFR) - Japanese government bonds mostly edged higher on Thursday, bolstered as U.S. and European sovereign bond yields touched record lows overnight.

The 30-year JGB advanced modestly, sending its yield down 1 basis point to 1.625 percent, after the yield on the current 30-year U.S. Treasury plunged as much as 6 basis points to a 15-month low of 3.10 percent overnight.

European bonds have gained since European Central Bank President Mario Draghi said last Friday that the bank was prepared to respond with "all available tools" if euro zone inflation dropped further.

In the Tokyo morning session, many domestic real money accounts took a wait-and-see stance, as 5-year to 20-year JGB yields have already fallen to their lowest levels since the Bank of Japan unveiled its quantitative easing regime in early April 2013.

Sluggish Tokyo stocks and a stronger yen also had some positive impact on 30-year JGBs. The Nikkei stock average was down 0.5 percent, and the dollar slipped about 0.1 percent to 103.76 yen.

The Ministry of Finance will conduct a monthly 2.7 trillion yen (26 billion US dollar) 2-year JGB auction on Thursday. The BOJ, therefore, did not offer to buy JGBs under its massive asset purchase programme, as it typically refrains from doing so on days that MOF sells JGBs.

At midday, the yield on the current 2-year JGBs was down 0.5 basis point at 0.07 percent, while the 10-year yield was also down 0.5 basis point at 0.485 percent. The yield on the current 40-year JGBs remained unchanged from the previous session at 1.785 percent, and the 20-year and 5-year yields were flat 1.325 percent and 0.155 percent respectively.

In the morning session, 10-year lead September JGB futures moved in a 146.26-146.31 range before ending at midday up 0.05at 146.29.

(1 US dollar = 103.7600 Japanese yen) (Reporting by Masatsugu Hisatsune; Editing by Eric Meijer)

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