* Demand robust for 10-yr auction despite low coupon
* JGB 10-yr futures, prices pare losses
* Investors should seek chance to buy on weakness - analyst
By Dominic Lau
TOKYO, July 3 Japan's 10-year government bond
futures and prices recovered early losses to trade higher o n
Tuesday after demand was robust for a debt auction of similar
maturity despite the lowest coupon rate in nine years.
Many market players had previously expected demand for the
2.3 trillion yen ($29 billion) worth of 10-year bonds to be just
fair as they offered a coupon of 0.8 percent, the lowest since
However, the solid demand, with a bid-to-cover ratio of
3.10, up from the previous auction's 2.95, prompted investors to
cover their bearish bets.
"It came out stronger-than-expected ... The strong auction
result is showing you that investors are under invested.
Investors are looking to pick up on dips in the market despite
the fact that equities and other risk markets are strong," said
Le Ngoc Nhan, a strategist at Morgan Stanley MUFG.
The 10-year JGB futures ticked up 0.05 point to
143.82 after trading as low as 143.63 before the auction
results. Tuesday's gain took the futures to above their five-day
The yield on 10-year cash bond pared gains to
trade down 1.5 basis points at 0.810 percent after the auction,
while that of longer-dated 30-year bond also
attracted buying interest, down 1 basis point to 1.850 percent.
Nhan said JGB yields would continue to be a function of risk
condition driven mainly by the euro zone crisis. Further
improvements in Europe "could see higher yield which is
something I expect in the near-term," he said.
Credit Suisse also said it did not expect to see any repeat
of sharp risk-off moves as in the last quarter but a substantial
rise in yields was also unlikely.
"Although a substantial rise in yields looks unlikely, we
think a rise in yields to the extent of reversing the declines
that have been recorded thus far is quite possible," it said in
"We see no reason to aggressively chase higher prices, and
think it best to hold back to maintain the ability to buy on
weakness when yields are rising," Credit Suisse added.