JGBs edge down, underpinned by decent 2-year sale

TOKYO: Japanese government bonds edged down on Tuesday, underpinned by decent demand at a two-year auction, even as brighter economic data spelled possible future concerns for bond market investors.

The benchmark 10-year cash JGB yield added 1 basis point to 0.045 percent.

The 10-year JGB futures contract ended down 0.07 point at 150.80. Some 27,815 contracts were traded, nearly three times the previous session's holiday-thinned volume which was at its lowest in more than four months.

The 2-year yield was flat at minus 0.150 percent  after decent demand at a two-year auction, though it was below that of previous sales.

The Ministry of Finance offered 2.2 trillion yen ($19.42 billion) of two-year JGBs with a 0.10 percent coupon, with 20.5636 percent of the bids accepted at the lowest price of 100.4650.

The sale drew bids of 4.32 times the amount offered, down from the previous month's bid-to-cover ratio of 4.76 times and 5.93 at the October sale.

In the superlong zone, the 20-year yield was half a basis point higher at 0.565 percent, while the 30-year yield was also up half a basis point at 0.815 percent .

While JGBs had a muted reaction to economic data released earlier in the session, signs of slightly higher inflation could pose future risks to bond market sentiment.

Japan's core consumer prices rose for a 11th straight month, up 0.9 percent year-on-year, and household spending jumped in November.

Still, minutes of the Bank of Japan's October meeting, released on Tuesday, showed most members shared the view that the central bank should maintain its easy policy while the inflation rate remains distant from the BOJ's 2 percent target.

The BOJ held monetary policy steady last week, and its governor reassured markets the central bank will lag well behind overseas counterparts in ending its ultra-easy policies.