JGBs mostly gain as strong 30-yr sale pulls yields off highs

TOKYO : Japanese government bonds mostly firmed on Tuesday as a strong 30-year auction reassured investors’ fears about demand in the wake of last week’s selloff.

The benchmark 10-year JGB yield fell 2.5 basis points to minus 0.080 percent, down from an earlier high of minus 0.030 percent. September 10-year futures were up 0.35 point at 151.53 in afternoon trading after rising as high as 151.56 soon after the auction results were released.

The Ministry of Finance offered 800 billion yen ($ 7.82 billion) of 30-year JGBs with a 0.3 percent coupon.

The notes sold at a lowest price of 96.50, drawing bids of 3.07 times the amount offered, improving from the previous sale’s bid-to-cover ratio of 2.64 times.

The tail between the average and lowest accepted prices narrowed to 0.21, compared with that of last month’s offering at 0.75, indicating stronger demand for the bonds.

“There are plenty of people who still want to buy JGBs with positive yields, and it seems the market is relieved by the outcome,” said a fixed-income fund manager at a European asset management firm in Tokyo.

A week ago, JGBs logged their worst sell-off in more than three years, after the Bank of Japan refrained from including additional JGB purchases in the easing steps it announced on July 29.

Yields in the superlong zone came off session highs after the auction results, reflecting higher bond prices.

The 30-year JGB yield was half a basis point higher at 0.420 percent after earlier rising as high as 0.430 percent, its highest since early April.

The 20-year JGB yield was down 1 basis point at 0.310 percent, below an earlier high of 0.335 percent. ($ 1 = 102.3400 yen) (Reporting by Tokyo markets team)