April 16, 2014 / 3:15 AM / in 3 years

Benchmark JGBs edge down as stocks rise, moves limited by auction

3 Min Read

TOKYO, April 16 (IFR) - Benchmark Japanese government bond prices edged down on Wednesday, against the backdrop of firmer equities, with JGB market moves limited by caution ahead of Thursday's sale of 20-year bonds.

A few pension funds continued to buy the current 20-year JGBs ahead of Thursday's monthly auction of 1.2 trillion yen ($11.81 billion) of 20-year bonds, which will re-open the current issue. This morning's purchases of 20-year JGBs forced some dealers to buy the current 10-year JGBs to cover their short positions in the 20-year zone.

Meanwhile, several regional banks continued to sell 10-year JGBs on expectations that the benchmark 10-year JGB yield will not break below the 0.60 percent mark for some time, as Japan's economy steadily improves.

This morning, as widely expected, the Bank of Japan offered to buy a total of 900 billion yen of JGBs maturing in more than 1 year and within 10 years, in three tranches under its JGB buying programme.

Earlier, BOJ Governor Kuroda spoke at the Lower House Financial Affairs Committee. He affirmed the bank's upbeat view of the economy, stressing that growth will pick up around mid-year as the sting of a sales tax hike fades.

One corporate pension fund manager told IFR this morning that he expects the BOJ to take further easing steps if the dollar breaks below the 100 yen level.

At midday, the yield on the new 5-year JGBs rose 0.5 basis point on the day to 0.190 percent, compared with and average auction yield of 0.189 percent in Tuesday's sale of 5-year notes.

The 10-year yield was also up 0.5 basis point at 0.605 percent, compared with 0.600 percent earlier in the session.

In the superlong zone, the 20-year yield was down 1 basis point at 1.470 percent, compared with 1.480 percent earlier, ahead of Thursday's sale, while the 30-year yield was flat at 1.685 percent, compared with last Friday's average auction yield of 1.696 percent.

Ten-year June JGB futures moved in a 145.02-145.13 range before finishing the morning session down 0.05 at 145.03.

The Nikkei stock average added 2.3 percent, helped by China reporting economic growth of 7.4 percent on year in the first quarter, fractionally more than expected. ($1 = 101.6450 Japanese Yen) (Reporting by Masatsugu Hisatsune; Editing by Eric Meijer)

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