December 9, 2013 / 3:51 AM / in 4 years

Superlong JGBs weaken as BOJ refrains from buying

TOKYO, Dec 9 (IFR) - Japanese government bond prices ended the morning mixed on Monday, with the superlong zone slightly underperforming as the Bank of Japan refrained making any purchases this session under its asset-buying stimulus program.

The 7-year to 10-year zone outperformed the rest of the curve, as several regional banks bought 10-year JGBs on dips, sending the yield on the current 10-year JGBs down half a basis point to 0.665 percent.

Last Friday, one large savings bank purchased the current 10-year JGBs on dips. The 7-year to 10-year JGBs turned firmer on Monday even though the BOJ did not offer to buy coupon-bearing JGBs, contrary to market expectations.

One corporate pension fund manager told IFR this morning that he does not expect the majority of other corporate pension funds at large Japanese trust banks to start shortening the duration of their bond portfolios soon, because of concerns about Japan’s economic outlook.

Data released on Monday showed Japan’s economy expanded less than expected in July-September, suggesting that the recovery remains fragile due to soft global demand.

At midday, the yield on the current 5-year JGBs was unchanged from Friday at 0.20 percent, ahead of Thursday’s monthly sale of 2.7 trillion yen ($26.29 billion) of 5-year notes.

In the super-long zone, the 20-year yield rose 0.5 basis point to 1.515 percent, while the 30-year yield also added 0.5 basis point to 1.685 percent ahead of Tuesday’s monthly auction of 600 billion yen of 30-year bonds.

Lead December JGB futures moved in a 144.39-144.69 range before finishing the morning session up 0.16 point at 144.67 ahead of Wednesday’s contract expiry.

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