July 4, 2013 / 3:01 AM / in 5 years

Benchmark JGBs edge up, with 30-year auction in focus

TOKYO, July 4 (Reuters) - Benchmark Japanese government bond prices edged up on Thursday, though gains were limited by caution on supply concerns as the finance ministry conducted an auction 30-year debt.

* The Ministry of Finance offered 600 billion yen ($6.02 billion) of 30-year bonds with a coupon of 1.9 percent, reopening the current issue.

* As July is the beginning of a new quarter, many investors probably feel little pressure to hurry their purchases, strategists at Bank of America Merrill Lynch said in a note to clients.

“Although the 30-year JGB is a BUY in terms of price, some investors intend to stay on the sidelines for the auction and purchase in the secondary market, so we expect satisfactory results backed by cost-averaging demand,” they wrote.

* The 10-year yield shed half a basis point to 0.875 percent, still mired in a 0.80 to 0.90 percent trading range where it has been stuck the past five weeks.

* Ten-year JGB futures ended morning trade up 0.08 point at 142.43 after trading in a narrow range between 142.37 and 142.50.

* The superlong tenor slipped ahead of the 30-year sale, as investors made room in their portfolios to buy. The 30-year yield inched up half a basis point to 1.905 percent, matching a six-week high touched in the previous session.

The 20-year yield added 1 basis point to 1.765 percent.

* Bank of Japan Governor Haruhiko Kuroda told a quarterly meeting of the BOJ’s regional branch managers that the economy is on track to a steady recovery with signs inflation expectations are picking up.

* Rising Treasury yields and expectations of continued BOJ easing at home could eventually prompt Japanese investors to seek higher returns in overseas assets, but such a trend is not yet in place.

Japanese Ministry of Finance data showed Japanese investors’ net selling of foreign bonds continued last week, for the seventh straight week.

* “We’re paying cautious attention to developments in Europe, and awaiting the U.S. payrolls report, but for now, domestic supply conditions are the main factors in the JGB market,” said a fixed-income fund manager at a European asset management firm.

* The European Central Bank will hold its monthly meeting on Thursday, against a backdrop of a political crisis in Portugal which risks derailing that country’s efforts to emerge from its international bailout.

* U.S. financial markets will be closed on Thursday in observance of the Independence Day holiday. On Friday, the key jobs report for June is expected to show payroll additions of 165,000 last month and a lower unemployment rate of 7.5 percent, according to economists polled by Reuters.

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