August 7, 2018 / 6:42 AM / 10 months ago

JGBs steady to slightly weaker, 30-year yield hits 9-month high

TOKYO, Aug 7 (Reuters) - Japanese government bond prices were steady to slightly weaker on Tuesday, with 30-year bond yield hitting a nine-month high ahead of an auction later this week.

Ahead of the 30-year bond sale on Thursday, Tuesday’s auction of 400 billion yen inflation-linked 10-year Japanese government bond auction appeared to have attracted decent bids from foreign players, giving the market some support, traders said.

The 30-year JGB yield climbed as high as 0.855 percent, its highest since early November, as market players prepared for Thursday’s auction.

The yield has risen 17 basis points since late July, when various media reported the Bank of Japan (BOJ) planned to tweak its policy. Last week, the BOJ said it would manage its policy of yield control and asset purchases more flexibly.

The 10-year Japanese government bond yield ticked up 0.5 basis point to 0.105 percent, though it kept away from its 1-1/2-year high of 0.145 percent hit last week.

The tenor was supported by an extreme shortage of maturities around 10 years after the BOJ conducted unlimited buying on Monday last week and another unplanned purchase on Thursday.

The BOJ bought bonds worth about 2 trillion yen, an amount that is equal to 90 percent of the monthly sale of 2.2 trillion yen 10-year bonds by the government.

More investors now expect the market to be range-bound after a volatile fortnight until last Friday.

The 10-year JGB futures price rose 0.01 point to 150.14, .

The quarterly auction of 400 billion yen 10-year inflation-linked JGBs attracted bids 3.12 times the amount of offer, the second-highest in the past 10 auctions.

The bonds were sold at the high yield of minus 0.309 percent, about 41 basis points below the conventional 10-year JGBs.

Still the yield gap, known as a gauge of investors’ inflation expectations, was at the lowest since last October. (Reporting by Tokyo Markets Team, Editing by Sherry Jacob-Phillips)

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