TOKYO Dec 4 Japanese government bond prices
fell on Tuesday, with the benchmark futures breaking a six-day
winning streak, as market players tried to make room for a
10-year bond auction.
* The Ministry of Finance set the coupon rate on its 2.3
trillion yen ($28 billion) offer of 10-year bonds at 0.7
percent, the lowest level for 10-year paper since June 2003.
* The 10-year JGB futures fell fell 0.08 point to
144.79. The contract had hit a 9 1/2-year high of 144.91 on
Monday as JGBs have been supported by concerns that the Japanese
economy may be slipping into a recession.
* With the exception of the longest maturities, the market
have been bolstered by expectations that a likely change in the
Japanese government in the Dec. 16 election could lead to more
political pressure on the Bank of Japan to take more aggressive
* Opposition leader Shinzo Abe, a front-runner to become
prime minister after the Dec 16. election, has called for
unlimited easing to achieve inflation of two percent.
* The 10-year JGB yield ticked up 0.5 basis point to 0.705
percent, still not far from 9 1/2-year low of
0.695 percent hit last week.
* "Superlong" bonds such as 20- and 30-year bonds,
underperformed, as speculation of aggressive monetary easing
discourages investors from buying these maturities.
* The 20-year yield rose 1.0 basis point to 1.685 percent
, with the yield spreads between 10- and 20-year
yields rising to 98 basis points, near record high of 101 basis
points in hit in June 1999.
* "If today's auction doesn't go well, there will be more
pressure on 30-year bonds, ahead of the 30-year bond auction on
Thursday," said Naomi Muguruma, senior strategist at Mitsubishi
UFJ Morgan Stanley Securities.
* JGBs also took cues from softness in U.S. Treasuries on
Monday due to hopes of a success in Greece's debt buy-back and
data showing a modest recovery in the Chinese manufacturing