10-year JGBs gain even as BOJ trims buying, superlongs sag

TOKYO: Japanese government bonds of up to 10 years to maturity firmed on Wednesday on solid results of the Bank of Japan's buying in those maturities despite a cut in the buying amount, but longer-dated bonds were dented by rises in global bond yields.

The price of the benchmark 10-year JGB futures rose 0.10 point to 150.68, the fifth straight session of gains. The yield on the benchmark 10-year cash bond yield dipped 0.5 basis point to 0.040 percent, its lowest since June 8.

The BOJ trimmed its buying of five- to 10-year JGBs to 440 billion yen ($3.98 billion) in its operation on Wednesday from 470 billion yen ($4.25 billion) in the previous four operations.

Although the market initially dipped on the announcement of the cut in size, results of the BOJ's operation announced later were strong due to limited selling interest, helping to support the market.

In contrast, longer maturities, on which the BOJ has a looser control, tracked fall in U.S. bond prices following strong  retail sales and factory data and on apparent signs of easing U.S.-North Korea tensions.

The 20-year JGB yield gained 1.0 basis point to 0.565 percent, while the 30-year bond yield rose 2.0 basis points to 0.865 percent.

The yield spread between 10- and 30-year JGBs widened to 82.5 basis points, the biggest since February.

"Given that domestic economic fundamentals are pretty good now and that the BOJ is buying only a half of bonds with 25 years and more to maturity, steepening in the yield curve is likely to continue," said Naoya Oshikubo, yen rates strategist at Barclays.