TOKYO: Japanese government bond futures ticked up in thin trade on Thursday while super long cash bond prices inched down as brokers squared positions ahead of a three-day weekend.
The Ministry of Finance set a 0.1 percent coupon on 2.7 trillion ($34.63 billion) of two-year JGBs it is offering on Thursday, down from 0.2 percent at the previous sale in November and the lowest since September. The auction results will be released at 12:45 p.m. (0345 GMT).
The new bonds are expected to be digested smoothly, analysts said, underpinned by safe-haven bids amid the ongoing euro zone debt crisis and expectations that the Bank of Japan will maintain its monetary easing stance.
The sale is likely to reflect recent strong foreign demand for Japanese short-term paper. According to weekly finance ministry data, foreign investors bought the second-biggest net amount of Japanese short-term bills on record in the week to Dec. 17, buying 2.66 trillion yen worth.
March 10-year JGB futures were up 0.02 point at 142.35, off a one-week low of 142.20 hit on Wednesday but keeping below the lower end of their Ichimoku cloud on charts at 142.52, which is seen as major technical resistance point.
In cash bonds, the 10-year yield was flat at 0.975 percent, staying near a three-week low of 0.965 percent hit this week.
A failed German bond auction last month set JGB market players on edge, pushing up the 10-year JGB yield to a four-month high of 1.090 percent, though the yield has fallen back below 1.0 percent since then.
The European Central Bank's cheap loans to banks eased immediate concerns about a credit crunch in the euro zone, but market participants said it will not be enough to resolve the region's debt crisis.
"Spanish and Italian yields remain high and it is hard to foresee how the debt crisis will be resolved as it is developing into a political problem. So the risk-averse stance taken by investors will not change," said a trader at a US brokerage.
Meanwhile, superlongs such as 20- and 30-year bonds underperformed other maturities. The 20-year yield was up 1 basis point at 1.745 percent and the 30-year yield climbed 1.5 basis point to 1.925 percent.
Traders and fund managers said both maturities were weighed down by brokers' inventory adjustment as investors such as government-affiliated institutions are said to be finishing planned purchases within this week.
The Finance Ministry plans to sell a record 149.7 trillion yen of bonds through regular auctions in the fiscal year from April, sources with knowledge of the matter told Reuters. The total sales would be 4.8 trillion yen larger than this year's initial plan.
The ministry is considering raising the monthly issue of 20-year bonds by 100 billion yen, and also either the five- or 10-year bonds by that amount, the sources said.
The size of the increase is mostly in line with analysts' expectations and the market took the new plan in its stride by midday, with many Japanese investors content with holding a large amount of JGBs.
Comments
Comments are closed for this article.