TOKYO, Jan 28 (IFR) - Japanese government bond prices were mixed on Tuesday, with the benchmark 10-year yield inching lower, but activity was thin as investors braced for more stimulus withdrawal from the U.S. Federal Reserve.
Fed officials are seen cutting bond buying by another $10 billion at their regular two-day policy meeting beginning later on Tuesday.
The yield spread between 10-year and 30-year JGBs widened by 2.5 basis points (bps) on the day from 99.5 bps to a one-week high of 102 bps. But trading volume in the cash market was limited in the superlong zone, according to traders.
In the medium-term zone, a few dealers tried to unload 5-year JGBs which one megabank sold on Monday, while other investors tried to buy 6-year JGBs.
In the superlong zone, a few corporate pension funds sold sporadically as the Bank of Japan refrained from outright purchase operations, while some government pension funds bought superlong JGBs on dips.
Superlong JGBs extended losses in the afternoon despite stronger-than-expected results of the Ministry of Finance’s monthly 300 billion yen liquidity enhancement auction for old 10-year and 20-year JGBs.
The yield on the current 10-year JGBs was down 0.5 basis point from Monday at 0.625 percent, while the 20-year yield was up one basis point at 1.475 percent.
With regard to the benchmark 10-year JGB yield, two money managers at mid-sized asset management companies told IFR this morning that they don’t expect it to fall below the 0.60 percent mark for the time being, as there is strong price resistance around that level.
Elsewhere, one large commercial bank continued to persistently sell long-term municipal and government-guaranteed bonds.
Lead March JGB futures fluctuated in a narrow range between 144.64 and 144.75 before finishing the day up 0.02 point at 144.66.