* Bid-to-cover ratio at 10-yr sale rises to 4.05
* 10-yr yields remain locked in 4 bp range since Sept. 24
* Superlong sector slightly higher
By Lisa Twaronite
TOKYO, Nov 1 Japanese government bonds mostly
fell on Thursday, but were off the session's lows after a
10-year sale went as smoothly as most market participants had
Prices remained in recent ranges as investors awaited a cue
from U.S. debt markets, with Friday's U.S. employment data and
Tuesday's presidential election in focus.
The Ministry of Finance offered 2.3 trillion yen ($29
billion) worth of 10-year notes, reopening the number 325 issue
with a coupon of 0.8 percent, the third time that issue was
The ministry sold the bonds at a lowest accepted price of
100.20, in line with market expectations. The bid-to-cover ratio
was 4.05, up from 3.40 at the previous tender, and the tail
between the average and lowest accepted prices shrank slightly
to 0.01 from 0.02 at the previous sale.
The solid results were not enough to jar benchmark yields
out of the 4 basis-point range between 0.755 percent and 0.795
percent in which they have moved since Sept 24.
"The auction was uneventful," said Keiko Onogi, senior JGB
strategist at Daiwa Securities. "Ahead of the U.S. payrolls data
and election, it is difficult to make big moves in the JGB
Reopenings are offerings of securities with the same terms
and conditions as an existing one, used to increase the
liquidity of an outstanding issue.
"It is noteworthy that last week's 5-year sale was also a
reopen, as was the 20-year sale before that. This shows how
stably JGBs have been trading lately," said a fixed-income fund
manager at a Japanese asset management firm.
Against this backdrop of low volatility, recent 10-year
sales have met strong market demand, as the benchmark bond is
the most liquid and has recently offered higher carry and
rolldown compared with other sectors, market participants said.
In a carry and rolldown strategy an investor buys a bond and
aims for capital gains, as a bond's value increases as it
matures if the yield curve is steady.
The 10-year yield added half a basis point to
0.775 percent, after rising as high as 0.785 percent before the
auction results, its highest since Oct. 23.
Ten-year JGB futures closed down 0.11 point at
144.14, above a session low of 143.91 before the auction
The recently-battered superlong sector stabilised. Yields on
20-year debt fell 1 basis point to 1.680 percent,
while those on the 30-year bonds also lost a
basis point to 1.940 percent.
Political uncertainty is one factor that has weighed on
longer-dated JGBs, market participants say.
Primary dealers in Japanese government bonds warned the
finance ministry last week of the growing risk of a ratings
downgrade over a political standoff on passing a
deficit-financing bill needed to fund this fiscal year's budget.
While most investors expect the government to pass the bill, its
failure to do so could interrupt JGB issuance.
"The threat that the political impasse will force the MOF to
cancel a bond auction is credit negative," Moody's Investors
Service warned in a report on Thursday.