Superlong JGBs outperform, yield curve flattens


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

The 30-year yield slipped 1.5 basis points to1.645 percent, not far from a five-month low of 1.610 percenttouched last week, while the 20-year yield eased1 basis point to 1.510 percent.

Yields on benchmark 10-year JGBs inched up0.5 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 BarackObama refusing to give ground on Tuesday, saying he would onlynegotiate on budget issues if Republicans agreed to re-open thefederal 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 shareindex ended down 1.2 percent.

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

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

Earlier, minutes of the central bank's September meetingshowed BOJ policy board members agreed that a virtuous cycleincluding production, income and spending is functioning well asthe economy recovers.

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

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