August 30, 2018 / 6:16 AM / 7 months ago

JGBs fall on option-related selling, wariness ahead of BOJ bond announcement

TOKYO, Aug 30 (Reuters) - Japanese government bond prices slipped on Thursday on wariness ahead of the Bank of Japan’s announcement on its bond-buying plan for September and option-related selling in the benchmark futures contract ahead of their expiry.

Some traders were nervous that the BOJ could indicate it would reduce JGB purchases slightly next month when it announces its monthly bond operation guidelines late on Friday.

In addition, option traders who hold short positions in the September call with strike price of 150.50 are selling JGB futures to adjust their positions as the risk exposures from that option contract dwindle sharply ahead of their expiry on Friday.

Ten-year JGB futures fell 0.13 point to 150.31, marking the biggest fall in almost a month, with a trading volume of 34,566 lots.

The 10-year JGB yield rose 1 basis point to 0.105 percent while the 20-year JGB yield rose 1 basis point to 0.620 percent.

The 30-year JGB yield rose 1.5 basis points to 0.850 percent.

The benchmark two-year JGB yield rose 0.5 basis point to minus 0.115 percent while the five-year JGB yield rose 0.5 basis point to minus 0.075 percent.

An auction of two-year JGBs held on Thursday attracted relatively strong demand, with the bid-to-cover ratio rising to 5.26 times from 4.38 in the previous month. (Reporting by Hideyuki Sano; Editing by Sunil Nair)

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