* Superlong tenor outperforms as yen strengthens
* Buy 20/30 box spread ahead of 20-yaer sale - strategists
By Lisa Twaronite
TOKYO, Jan 23 Japanese government bonds mostly
slipped on Wednesday, giving back some of the gains made in the
previous session when the Bank of Japan doubled its inflation
target to 2 percent and committed to open-ended asset purchases.
The yield curve flattened as short- and medium-term bonds
fell as investors locked in gains, while the recently battered
superlong tenor fared better in line with a resurgent yen.
Japan's central bank pledged to extend asset buying into
2014, with no time-limit and an initial plan to buy 13 trillion
yen in mostly short-term bills in that year.
"Investors were positioned for an easing announcement, so
it's a classic example of 'buy the rumor, sell the fact,'" said
Tomohiro Miyasaka, an analyst at Credit Suisse in Tokyo.
Some investors were disappointed that the open-ended buying
would not begin until 2014, but the scope of the measures was
greater than many had expected.
But JGBs were underpinned by expectations that the BOJ will
have to take more easing steps and buy more assets to try to
achieve its inflation target.
"There was feeling that the BOJ isn't going to do much in
the near-term, but overall, their commitment to easing is
supportive for JGBs, particularly short- and medium-term
maturities," said a fixed-income fund manager at a Japanese
trust bank in Tokyo.
The 10-year JGB yield was flat 0.730 percent,
while benchmark 10-year JGB futures slipped 0.08 point
to 144.37, moving away from a nearly six-week intraday high of
144.57 hit on Tuesday. Futures remain above their 100-day moving
average, now at 144.19.
A stock-market correction limited losses in the bond market,
participants said. The Nikkei shed 2.1 percent to a
three-week closing low.
The five-year yield added 1.5 basis points to
0.160 after drooping as low as 0.140 percent on Tuesday, the
lowest recorded since Japan started issuing 5-year bonds in
The dollar hit a 2-1/2 year high of 90.25 yen on Monday
ahead of the BOJ outcome, but fell back to buy 88.145 yen on
Wednesday, bolstering the superlong tenor that sagged in the
previous session on fears that the aggressive monetary policy
will trigger inflation in the long term, and also on supply
concerns ahead of a 20-year sale on Thursday.
The 30-year bond yield fell 2 basis points to
1.950 percent, while the 20-year yield lost 1
point to 1.730 percent.
On Thursday, the Ministry of Finance will offer 1.2 trillion
yen of 20-year bonds, either by reopening the number 141 issue,
which carries a 1.7 percent coupon, or newly issuing debt with a
coupon of 1.8 percent.
Strategists at both RBS Securities and Barclays recommend
taking a 20/30 box spread, in which one buys a 20-year asset
swap and sells a 30-year asset swap.