Business & Finance

JGBs slip on ECB lending hopes, 20-year JGB sale eyed

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Market participants said broker hedging and position squaring ahead of Tuesday's 1.1 trillion yen ($14 billion) 20-year JGB auction also weighed on cash bonds with maturities over 10 years.

Although demand from buy-and-hold investors such as life insurers is seen supporting the sale, some expect demand to be lukewarm as absolute yield levels are low and the supply outlook has become less favourable.

A number of JGB primary dealers reckon that superlongs such as the 20-year could cope with an issuance increase in the fiscal year starting next April, a Ministry of Finance official told reporters after a regular meeting with primary dealers on Friday.

The benchmark 10-year yield was down 1.5 basis points at 0.955 percent, off a one-year low of 0.940 percent hit last week. The 20-year yield was 1.715 percent and the 30-year yield 1.940 percent, both also down 1.5 basis points.

Italian and Spanish bond yields fell on Friday after the ECB move and talk of it lending to the IMF to bail out the euro zone, driving German Bunds near three-week lows.

But market players expect the euro-zone debt crisis to continue to underpin JGB prices. A Reuters weekly survey issued on Monday showed sentiment in the JGB market turned positive for the first time in seven weeks.

The other focus is the US deficit-reducing panel. Congressional aides said the bipartisan deficit-reduction committee could come up empty handed at midnight on Wednesday and fail to meet their deadline to find $1.2 trillion in budget cuts over the next decade.

December 10-year JGB futures slipped 0.12 point to 142.97, off a one-year high of 142.14 hit on Thursday. The Tokyo Stock Exchange started trading JGB futures and options 15 minutes earlier from Monday, at 8:45 a.m. (2345 GMT), to operate its new system for futures and options. It will also extend its evening session trading for futures and options to 11:30 p.m. (1430 GMT) instead of 6 p.m.

Copyright Reuters, 2011