JGBs inch down slightly, but supported by BOJ buying
TOKYO, Sept 10 (IFR) - Japanese government bond prices edged down slightly on Wednesday after U.S. Treasuries dropped overnight, although Bank of Japan purchases supported the market.
The dollar hit a fresh 6-year high of 106.47 yen in U.S. trading on Tuesday, while U.S. Treasury yields rose on increased expectations that the Federal Reserve will take a more hawkish stance on raising rates at a policy meeting next week.
Both investors and dealers tried to sell JGBs directly to the BOJ under its massive JGB purchase program. As widely expected, the BOJ offered to buy 400 billion yen ($3.76 billion US dollars) of JGBs in the 5-year to 10-year zone, 100 billion yen of JGBs in the 10-year to 25-year zone, and 30 billion yen of JGBs in the 25-year to 40-year zone.
This combination of maturities and amounts was exactly in line with market expectations, as the central bank purchased the same amounts of JGBs on June 23, July 17, July 24, Aug 6, and Aug 27.
In early morning trading, a few large pension funds sold the new JGB futures contract for December before Wednesday's expiration of the September contract.
The yield on the current 5-year JGBs inched up half a basis point to 0.160 percent, ahead of Thursday's monthly 2.7 trillion 5-year JGB auction. The 10-year yield also added half a basis point to 0.530 percent, after both the 5-year and 10-year JGBs remained untraded in the morning session on JBT, the largest inter-dealer broker for JGBs.
In the superlong zone, the yield on 20-year JGBs added half a basis point to 1.340 percent, while the yield on the new 30-year JGBs was flat on the day at 1.680 percent, compared with the average accepted yield of 1.679 percent at Tuesday's 30-year sale.
The new lead 10-year December JGB futures contract was down 0.04 point at 145.76, while the September contract edged down 0.02 point to 146.19.
The JGB market shrugged off government data released early in the session that showed Japan's core machinery orders rose for a second straight month in July. Analysts said the data failed to dispel doubts about the strength of business investment that is needed to propel Japan out of the slump caused by April's sales tax hike.
(1 US dollar = 106.3100 Japanese yen) (Reporting by Masatsugu Hisatsune; Editing by Eric Meijer)
