* Mood cautious ahead of 2 long-dated bond auctions this wk
* U.S. Treasuries fall after strong non-manufacturing ISM
* Futures trade volume second lowest so far this year
By Hideyuki Sano
TOKYO, Aug 6 Japanese government bond prices
eased on Tuesday, failing to extend the previous day's gains
beyond its recent trading range, following soft long-dated JGB
auction results and after U.S. Treasuries slipped the day before
on strong U.S. service data.
The auction drew tepid demand in part as the market is
bracing for another 30-year bond auction later this week while
trade volume slowed to the second lowest level so far this year.
The yield on the benchmark 10-year JGBs rose 0.5 basis point
to 0.775 percent a day after having posted its
largest fall in seven weeks following slower-than-expected U.S.
On Monday, it matched a 10-week low of 0.77 percent hit last
"The market doesn't have momentum to push beyond 0.77
percent. The Japanese economy is looking up, with the GDP data
next week expected to show growth of more than three percent,"
said Naomi Muguruma, senior strategist at Mitsubishi UFJ Morgan
The yield curve steepened slightly after the Ministry of
Finance's offer of super-long maturities attracted lukewarm
demand from investors.
The 20-year bond yield rose 3.0 basis points to 1.725
percent while the 30-year yield rose 3.0 basis
point to 1.840 percent.
The Ministry of Finance offered 300 billion yen of bonds in
a "liquidity-enhancing" auction, in which the ministry re-offers
existing 20- to 40-year bonds.
The bid-to-cover ratio fell to 2.04 from 2.62 in the
previous auction. Bids were not aggressive as there is another
30-year bond auction on Friday -- an unusual schedule as the
ministry normally tries to avoid having two superlong bond
auctions in the same week.
JGBs were not helped by a soft tone in U.S. Treasuries on
Monday. U.S. debt prices eased after the Institute for Supply
Management's index on the U.S. services sector jumped to 56.0
from 52.2 in June, well beyond economists' forecast of 53.0.
Ten-year JGB futures prices slipped 0.06 point to
143.66. Trading volume was a paltry 12,029 lots, its second
lowest and just over one-third of the average daily volume so
far this year.