February 13, 2013 / 3:00 AM / 5 years ago

JGBs mostly flat, superlongs solid ahead of auction

TOKYO, Feb 13 (Reuters) - Japanese government bonds were mostly flat on Wednesday though longest maturities held firm on expectations that an ongoing auction of 40-year JGBs will attract solid demand.

* The immediate focus is on a quarterly auction of 400 billion yen ($4.25 billion) 40-year JGBs. The Ministry of Finance on Wednesday reopened the 40-year bonds maturing March 2052. The auction closes at noon (0300 GMT) and the result will be announced at 12:45 p.m. (0345 GMT).

* Market players expect solid demand for the new offer as a sharp fall in short-term notes yield in the past couple of weeks has made long-dated bonds relatively more attractive.

* The current 40-year bonds were yielding 2.14 percent , down 1.0 basis point on the day while the yield of the more liquid 30-year bonds also dipped 1.0 basis point to 1.960 percent.

* Still, the yield spread between 30- and five-year bonds stood at 182.5 basis points, near a seven-year high of 186.5 hit last week.

* The five-year yield held at 0.135 percent, matching the record low on expectations that the Bank of Japan will continue to pursue aggressive easing steps to shore up the economy.

* “Given strong expectations of bold monetary easing, short-term yields are likely to stay at current low levels for some time,” said Katsutoshi Inadome, strategist at Mitsubishi UFJ Morgan Stanley Securities.

* The yield on the 10-year cash JGBs stood flat at 0.745 percent while the 10-year JGB futures price rose 0.03 point to 144.33.

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