TOKYO: Japanese government bond prices dipped on Tuesday as the Ministry of Finance offered about 2.3 trillion yen ($29.3 billion) of 10-year bonds -- a sale that many market players, albeit not all, expect to go smoothly.
The coupon on the issue was set at 0.800 percent, matching those of the last two 10-year offerings.
"We expect today's auction to go without a hitch," as the past two auctions went smoothly at roughly the same levels, wrote strategists at Barclays in a note to clients on Tuesday.
Ten-year debt is slightly expensive compared to other maturities, they said, but added that low volatility and decent supply and demand suggest little risk of a long tail between the average and lowest accepted prices.
But some potential buyers fretted about the possibility of weaker demand at the sale, ahead of a 30-year sale later in the week and following a very downbeat 20-year auction last month.
"There is no particular reason to buy. I don't have the feeling these yield levels are attractive, and I can afford to wait a while," said a fixed-income fund manager at a Japanese asset management firm.
Strategists at Morgan Stanley recommended buying 10-year asset swaps, which are historically cheap at their current near-flat levels, as they were at the previous auction as well.
The 10-year asset swap "is worthy of consideration as both a long-term carry trade offering around 2 basis points over a six-month horizon and a hedge against rises in Japanese interest rates," they said in a research note.
The yield on the latest 10-year JGB was flat at 0.780 percent after rising to 0.785 percent.
The benchmark 10-year JGB futures contract ended morning trade down 0.04 point at 144.10, after rising to 144.19 in the previous session, its highest in almost one month. But it remained above its 14-day moving average, now at 143.76.
The finance ministry will auction 30-year JGBs on Thursday. The 30-year bond was so far untraded on Tuesday, after its yield fell 1.5 basis points on Monday to 1.865 percent.
The 20-year JGB yield rose 1 basis point to 1.650 percent.
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