JGB prices steady ahead of 5-year debt auction

TOKYO, Oct 16 (IFR) - Japanese government bond prices were largely steady on Wednesday, ahead of an auction of 2.7 trillion yen ($27.4 billion) of five-year debt later in the day.

The 10-year yield was unchanged at 0.660 percent, though it was not far from a two-week high of 0.670 percent touched in the previous session.

Cash activity was limited to transactions among dealers in early trade, JGB traders said.

The Ministry of Finance was to sell the five-year JGBs with a coupon rate of 0.2 percent.

The existing five-year JGBs were also unchanged at 0.235 percent, a two-week high.

"We recommend a neutral stance if the auction takes place at 0.2-0.25 percent because of the absence of an environment that would support a sharp yield upswing and the exhaustion of period-start buying seen this month," analysts at the Royal Bank of Scotland wrote in a note.

Many domestic real money accounts were reluctant to chase prices higher until the U.S. fiscal stand-off is resolved, traders said.

Democratic and Republican leaders in the U.S. Senate could announce a deal within hours to extend the government's borrowing authority until Feb. 7 and quickly reopen federal agencies that have been closed since Oct. 1, a Senate aide said.

Longer-dated JGBs gained modestly, with both the 20- and 30-year yields down 0.5 basis point to 1.525 and 1.660 percent, respectively.

Ten-year JGB futures were steady at 144.26.