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CORRECTED-JGB prices gain after robust 20-year debt auction
August 27, 2013 / 6:36 AM / 4 years ago

CORRECTED-JGB prices gain after robust 20-year debt auction

(Corrects 10-year yield’s three-month low level to 0.720 pct in 10th paragraph)

* Ten-year JGB yield falls, near 3-month low

* Both 20, 30-year yields slip 1.5 basis points

* Syria has little impact on JGB markets

By Dominic Lau

TOKYO, Aug 27 (Reuters) - Japanese government bond prices rose on Tuesday after a robust 20-year debt auction, while expectations that the Bank of Japan would carry out bond-buying operations the following day as part of its programme to spur growth also boosted sentiment.

The Ministry of Finance sold 1.2 trillion yen ($12.2 billion) worth of 20-year bonds, with a bid-to-cover ratio of 3.39, up from its previous auction of 2.61.

The 20-year yield slipped 1.5 basis points to 1.680 percent, a one-week low. Longer-dated 30-year yield was also down 1.5 basis points, at 1.795 percent.

“We just passed the auction. The BOJ bond purchase above the 10-year sector is expected to come tomorrow,” said Tomohisa Fujiki, interest rate strategist at BNP Paribas in Tokyo, adding that month-end buying was another factor helping the market.

“Those should be the factors supporting the market rather than the Syrian issue at the moment,” he said.

The United States put Syrian President Bashar al-Assad on notice on Monday that it believes he was responsible for using chemical weapons against civilians last week, raising the prospects of U.S. military intervention in the Syrian conflict.

Increased tensions over Syria appeared to weigh on regional equity markets, with Asian shares as measured by MSCI Asia-Pacific ex-Japan index down 1.1 percent.

“The Bank of Japan will buy tomorrow in the 10, 20-year sectors, so dealers have no concerns about today’s auction,” said a fixed-income fund manager at a Japanese asset management firm in Tokyo.

The Japanese central bank stunned financial markets on April 4 by promising to inject $1.4 trillion into the world’s third-largest economy in less than two years to revive growth.

The 10-year yield fell 1.5 basis points to 0.745 percent, edging near a three-month low of 0.720 percent reached on Aug. 21. The five-year yield dipped 0.5 basis points to 0.290 percent.

Ten-year JGB futures, also helped by gains in U.S. Treasuries overnight after softer-than-expected durable goods orders in July, rose 0.24 point to 143.99, breaking above their five-day moving average of 143.90.

Trading volume in 10-year futures was relatively active, with 23,116 contracts changing hands, up from Monday’s 11,970 but down from a three-week high of 27,308 reached on Friday.

U.S. orders for long-lasting manufactured goods fell 7.3 percent last month, more than the 4 percent fall forecast by economists polled by Reuters.

The data, which came after last week’s figures showed a sharp decline in July new-home sales, raised some doubts about whether the U.S. Federal Reserve will start to reduce its $85 billion monthly bond-buying programme as soon as next month.

$1 = 98.5350 Japanese yen Editing by Stephen Coates

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