Superlong JGBs outperform, yield curve flattens

TOKYO, Oct 9 (IFR) - Japanese government bond prices mostly edged higher on Wednesday, with the superlong sectors outperforming, and leading a flattening of the yield curve.

The 30-year yield slipped 1.5 basis points to 1.645 percent, not far from a five-month low of 1.610 percent touched last week, while the 20-year yield eased 1 basis point to 1.510 percent.

Yields on benchmark 10-year JGBs inched up 0.5 basis point to 0.655 percent, however.

Ten-year JGB futures eased 0.02 point to 144.37.

The U.S. fiscal standoff dragged on, with President Barack Obama refusing to give ground on Tuesday, saying he would only negotiate on budget issues if Republicans agreed to re-open the federal government and raise the debt limit with no conditions.

Overnight, interest rates on one-month U.S. government debt hit a 5-year peak and the Standard & Poor's 500 share index ended down 1.2 percent.

The Bank of Japan offered to buy 760 billion yen ($7.8 billion) of JGBs with residual maturities of one to five years, as part of its plan to inflate the world's third-largest economy.

The five-year yield was flat at 0.220 percent after earlier dipping to 0.215 percent -- within striking distance of a six-month trough of 0.210 percent seen on Monday.

Earlier, minutes of the central bank's September meeting showed BOJ policy board members agreed that a virtuous cycle including production, income and spending is functioning well as the economy recovers.

At the Sept. 4-5 meeting, the BOJ upgraded its economic assessment to say Japan is recovering, with indications that the benefits of its expansionary policy are spreading.