JGB prices steady, shrug off stocks rally on U.S. fiscal deal

TOKYO, Oct 17 (IFR) - Japanese government bond prices were largely steady on Thursday, supported by Bank of Japan bond-buying and a solid five-year debt sale in the previous session, even though Tokyo shares rose to a three-week high after Washington reached a deal on its fiscal impasse.

The 10-year JGB yield edged up 0.5 basis point to 0.640 percent after falling 2.5 basis points on Wednesday after the 2.7 trillion yen ($27.3 billion), five-year bond sale attracted robust demand.

The five-year bond with a 0.2 percent coupon rate drew a bid-to-cover ratio of 4.83 on Wednesday, up from the previous auction of 3.3.

The five-year yield was flat at 0.220 percent, hovering near a five-month low of 0.210 percent touched in early October. Its yield fell 2 basis points on Wednesday.

"With five-year yields having approached 0.2 percent again, we believe there will be a need to remain cautious about the downside for JGB yields," analysts at Barclays Capital wrote in a note.

The market was also supported by the BOJ's offer to buy 850 billion yen worth of JGBs with residual maturities between one and more than 10 years, as part of its programme to revive growth in the world's third-largest economy.

The U.S. Senate overwhelmingly approved a deal on Wednesday to end a political crisis that partially shut down the federal government and brought the world's biggest economy to the edge of a debt default that could have threatened financial calamity.

Japan's Nikkei share average and other Asian shares climbed on the news. The Nikkei advanced 1.2 percent.

The 20-year yield was also unchanged at 1.505 percent, while the 30-year yield inched up 0.5 basis point to 1.645 percent.

Ten-year JGB futures were steady at 144.47.