TOKYO: Japanese government bond prices rose on Tuesday after a smooth auction of 30-year debt swept aside investors' fears that demand for the new paper might be lacklustre.
Investors were cautious ahead of Tuesday's sale of 700 billion yen ($5.8 billion) of 30-year JGBs, as yields nearing historical lows made the bonds relatively expensive.
The auction results, however, belied those concerns. The bid-to-cover ratio, a gauge of demand at auctions, rose to 3.12 from 3.02 at the previous sale last month. Participants were also relieved by a short 0.16 yen tail, which is the difference between the average and highest accepted price at an auction.
The length of a tail reflects the degree of demand at auctions.
"The fact that the tail at the auction was relatively short underscores tight supply resulting from the Bank of Japan's active purchases of super long bonds," said Satoshi Yamada, senior quants analyst at SMBC Nikko Securities.
The BoJ buys large amounts of JGBs as a part of its extensive monetary easing scheme, which it enhanced further on Oct. 31.
The benchmark 10-year JGB yield fell 1.5 basis points to 0.420 percent, approaching a 1-1/2 year low of 0.415 percent struck at the end of November.
The 30-year yield dropped 4 basis points to 1.380 percent. The yield curve flattened as a result with the 10-year/30-year yield spread tightening by 2 basis points to 96.5 basis points.
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