* Five-year yield falls to 0.130 pct
* MOF offers 5-year JGBs with record low coupon of 0.1 pct
By Dominic Lau
TOKYO, Feb 19 Japanese government bonds rose on
Tuesday, with the five-year yield hitting a record low ahead of
an auction later in the day, after Bank of Japan minutes
revealed board members had discussed buying longer-dated
government debt at their January meeting.
A few members of the nine-member board said one option could
be to extend the duration of government bonds purchased to
around five years, the minutes showed, a move that would help
push down the longer-end of the yield curve.
"That's really supportive," said Maki Shimizu, senior
strategist at Citigroup Global Markets Japan, referring to the
Under its asset-buying programme, the BOJ buys government
bonds with up to three years until maturity, as well as other
assets such as corporate debt, to pump money into the economy.
The five-year yield slipped 1 basis point to
0.130 percent to a record low, helping set the coupon of the
auction of 2.7 trillion yen ($28.73 billion) worth of similar
maturities at 0.1 percent, the lowest since Japan started
issuing five-year bonds in 2000.
Analysts expect decent demand at the auction, as investors
have been piling into short- and medium-term sectors on
expectations that the BOJ will take further steps to whip
deflation and achieve its target of 2 percent inflation.
"Fives offer small gains, but very limited downside," said
Neale Vincent, strategist at Nomura Securities in Tokyo.
"Investors seem to think that up to five years is rock-solid
safe," he said.
The 10-year yield eased 1 basis point to
0.730 percent to a three-week low, while 10-year JGB futures
gained 21 ticks to 144.48, breaking above their
five-day moving average of 144.28.
Yields on 30-year debt edged down 1 basis
point to 1.905 percent, reaching a two-month low and on track to
fall for the seventh straight session, while those on 20-year
bonds dipped 0.5 basis point to 1.730 percent
The long-end of the yield curve was supported by buying
interest from life insurers ahead of Japan's financial year
ending March 31.
"Historically, seasonal flattening pressure has been
strongest in the 10-year and longer sectors of the curve between
mid-February and early March," Barclays said in a note.
"In addition to the fiscal year-end build-up by life
insurers and other participants, this year will probably also
bring substantial demand for rebalancing by pension funds
accompanying the rise in share prices. Typically, the curve
shows a seasonal tendency to flatten into early March."