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JGBs ease on soft auction results, Treasuries
August 6, 2013 / 6:51 AM / 4 years ago

JGBs ease on soft auction results, Treasuries

* Mood cautious ahead of 2 long-dated bond auctions this wk

* U.S. Treasuries fall after strong non-manufacturing ISM

* Futures trade volume second lowest so far this year

By Hideyuki Sano

TOKYO, Aug 6 (Reuters) - Japanese government bond prices eased on Tuesday, failing to extend the previous day’s gains beyond its recent trading range, following soft long-dated JGB auction results and after U.S. Treasuries slipped the day before on strong U.S. service data.

The auction drew tepid demand in part as the market is bracing for another 30-year bond auction later this week while trade volume slowed to the second lowest level so far this year.

The yield on the benchmark 10-year JGBs rose 0.5 basis point to 0.775 percent a day after having posted its largest fall in seven weeks following slower-than-expected U.S. jobs growth.

On Monday, it matched a 10-week low of 0.77 percent hit last month.

“The market doesn’t have momentum to push beyond 0.77 percent. The Japanese economy is looking up, with the GDP data next week expected to show growth of more than three percent,” said Naomi Muguruma, senior strategist at Mitsubishi UFJ Morgan Stanley Securities.

The yield curve steepened slightly after the Ministry of Finance’s offer of super-long maturities attracted lukewarm demand from investors.

The 20-year bond yield rose 3.0 basis points to 1.725 percent while the 30-year yield rose 3.0 basis point to 1.840 percent.

The Ministry of Finance offered 300 billion yen of bonds in a “liquidity-enhancing” auction, in which the ministry re-offers existing 20- to 40-year bonds.

The bid-to-cover ratio fell to 2.04 from 2.62 in the previous auction. Bids were not aggressive as there is another 30-year bond auction on Friday -- an unusual schedule as the ministry normally tries to avoid having two superlong bond auctions in the same week.

JGBs were not helped by a soft tone in U.S. Treasuries on Monday. U.S. debt prices eased after the Institute for Supply Management’s index on the U.S. services sector jumped to 56.0 from 52.2 in June, well beyond economists’ forecast of 53.0.

Ten-year JGB futures prices slipped 0.06 point to 143.66. Trading volume was a paltry 12,029 lots, its second lowest and just over one-third of the average daily volume so far this year.

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