April 30, 2013 / 7:11 AM / 5 years ago

JGBs slip ahead of Wednesday's 10-year auction

* 10-yr futures drop on second-lightest volume this year
    * BOJ offers to buy 7.4 trillion of JGBs in operation
    * JGB market shrugs off improved Japan spending data

    By Lisa Twaronite
    TOKYO, April 30 (Reuters) - Japanese government bond prices
slipped on Tuesday, as investors made room in their portfolios
to buy at the next day's 10-year sale in a holiday-shortened
trading week.
    The Bank of Japan also offered to buy JGBs outright in its
regular asset-purchasing operations.
    The central bank said it will buy up to 200 billion yen
($2.04 billion) of notes with residual maturities of more than 1
year and up to 3 years, and an additional 400 billion yen of
notes with residual maturities of more than 3 year and up to 5
years. It also offered to buy 140 billion yen in floating-rate
    "I think the operations results have told us that there is a
little bit of underlying weaker demand at the short end of the
yield curve, and that's continued to weigh on the market,"      
  said Shogo Fujita, chief Japan bond strategist at Bank of
America Merrill Lynch.
    The 10-year yield added 1.5 basis points to
0.605 percent, up from 0.580 percent earlier in the session but
within last week's trading range of 0.575 to 0.610 percent. 
    Ten-year futures finished down 0.12 point at
144.53, after rising as high as 144.79 early in the morning
session. Volume was light at 16,023 contracts, the second-lowest
this year after 15,864 on April 22.
    The Ministry of Finance will offer 2.4 trillion yen of
10-year notes on Wednesday.    
    "The sale is expected to be uneventful. I don't hear anyone
expressing any worry about it," said a fixed income fund manager
at a Japanese asset management firm in Tokyo.
    "This trading week is short because of Golden Week, so
supply and demand factors will be driving the market," he added.
    Tokyo markets were closed on April 29, and will also be shut
for holidays on May 3 and May 6. The string of holidays is known
as Golden Week.   
    The 20-year JGB yield added 1 basis point to
1.485 percent and the 30-year yield was flat at
1.600 percent.
    Market participants shrugged off government data released
early on Tuesday that showed Japanese household spending rose a
greater-than-forecast 5.2 percent in March from a year earlier
in price-adjusted real terms. 
    Separate data from the Ministry of Economy, Trade and
Industry showed industrial production rose a less-than-expected
0.2 percent in March.   
    A survey of 10 Japan-based fund managers, polled between
April 18 and 24, showed they increased the overall bond
allocation slightly but cut their weighting on Japanese bonds to
a 16-month low after the BOJ's unveiled its massive stimulus on
April 4 aimed at ending deflation.

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