January 16, 2013 / 3:15 AM / in 5 years

JGBs firm as stocks sag; 5-year sale in focus

TOKYO, Jan 16 (Reuters) - Japanese government bond prices
rose on Wednesday, as sagging stocks and expectations of more
Bank of Japan stimulus lifted sentiment and was seen helping
demand at a sale of five-year notes. 
    * The Ministry of Finance is offering 2.5 trillion yen of
five-year notes, reopening issue number 107 with a coupon of 0.2
percent, matching the coupon of the past eight sales.
    * "We believe the auction is also likely to go smoothly or
even produce strong results. However, we believe participants
should keep in mind the risk that yields could rise to the
lower-0.2 percent level depending on the results of next week's
MPM (monetary policy meeting)," Noriatsu Tanji, a fixed income
strategist at Barclays in Tokyo, said in a note to clients.
    * Sources close to the central bank said it would consider
expanding stimulus again and double its inflation target to 2
percent at its Jan. 21- 22 meeting. 
    * The 5-year JGB yield was flat at 0.160
percent, after it fell as low as 0.150 percent on Friday, its
lowest since Dec. 6. 
    * "The 5-year note's moves on Friday took some investors by
surprise, and some believe it was overdone, although with the
BOJ supporting the short end, there is little risk in holding
5-years," said a fixed-income fund manager at Japanese asset
management firm in Tokyo.
    * The 10-year JGB yield fell 1 basis point to
0.755 percent, its lowest since Dec. 21, moving further away
from a 4-1/2-month high of 0.840 percent touched several times
last week.    
    * The benchmark 10-year JGB futures contract ended
morning trade up 0.12 point at its session high of 144.26.
    * The superlong sector outperformed, with the yield on the
20-year bond down 2 basis points to 1.740 percent
and that on the 30-year yield down 2.5 basis
points to 1.975 percent.     
    * "There is less fear about additional issuance now," the
fund manager said.
    * The finance ministry will issue an additional 300 billion
yen a month in government debt next month and in March, to fund
stimulus spending, which is a smaller increase than the 700-800
billion yen some market participants had estimated.
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