JGBs narrowly mixed ahead of 10-year auction

Reuters

TOKYO, Nov 6 (IFR) - Japanese government bond prices werenarrowly mixed on Wednesday, ahead of the outcome of an auctionof 10-year notes this session.

JGBs opened steady to moderately weaker on the back of acontinued rise in U.S. Treasury yields on Tuesday, but then20-year JGB prices turned firmer, sending its yield down 0.5 basis point to 1.495 percent, as onelife insurer bought in that zone in relatively thin trading.

Other investors were seen largely sidelined on caution aheadof the results of this session's monthly 2.4 trillion yen($24.35 billion) 10-year JGB auction.

The Ministry of Finance set the coupon on the new issue at0.6 percent, the lowest level since May 1. The ministry couldnot re-open the current issue with its 0.8 percent coupon, asthe difference between its coupon rate and the benchmark 10-yearJGB yield has widened over 0.15 basis point.

The 10-year yield was last up 0.5 basis pointat 0.605 percent.

Many regional banks are likely to buy the new 10-year noteson expectations that the Bank of Japan will purchase them in thesecondary market under its massive JGB-buying programme, marketparticipants said.

One money manager at a regional bank told IFR this morningthat this session's 10-year auction was likely to proceedsmoothly, led by dealers. Domestic money managers have shruggedoff stronger-than-expected domestic corporate earnings reportspublished recently. Bullish investors have been buying 10-yearJGBs as they believe the government's new economic stimulussteps will be insufficient to sustain Japan's economy after theconsumption tax increase in April next year.

The yield on the current 5-year JGBs was indicated at 0.195percent to 0.20 percent, compared with 0.195percent on Tuesday.

The 30-year yield was flat at 1.645 percent, ahead of nextTuesday's monthly 500 billion yen offering of 30-year JGBs.

Lead December JGB futures moved in a narrow144.90-144.95 range in the morning session before finishing down0.04 at 144.93.

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