November 29, 2016 / 5:05 AM / in a year

Two-year JGBs firm after auction, longer maturities soft

TOKYO, Nov 29 (Reuters) - The yield on the two-year Japanese government debt dipped on Tuesday after an auction of that maturities drew strong bids although longer maturities underperformed as buying dissipated following a rally in the last two sessions.

The auction of 2.3 trillion yen ($20.55 billion) two-year notes drew solid bids, producing the highest yield of minus 0.154 percent. The auction’s tail, or the gap between the average and lowest price, was 0.004, the same as last auction and signaling a tight demand.

The yield on the current two-year benchmark notes fell 2.0 basis point to minus 0.175 percent.

Other maturities were capped, however, due to lack of follow-through buying after their gains in the last two days on the back of rebounding U.S. Treasuries.

The 10-year yield rose 0.5 basis point to 0.015 percent , after hitting a 10-day low of 0.010 percent.

The 20-year yield firmed 0.5 basis point to 0.455 percent , after having fallen 4.5 basis points in the last two sessions.

Some investors who bought the 10-year bonds at the yield of zero percent earlier, believing that the BOJ would not tolerate a rise above that level, now appear to be ready to sell them into rallies, said a trader at a Japanese brokerage.

Traders were also cautious ahead of the 10-year JGB auction on Thursday. ($1 = 111.93 yen) (Reporting by Hideyuki Sano; Editing by Shri Navaratnam)

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