Business & Finance

JGBs mostly slip after disappointing 10-year sale

Published Updated

The 10-year JGB yield rose half a basis point to 0.885 percent, its highest level since May 25, moving away from a nine-year low of 0.790 percent hit on Monday.   

The lead 10-year JGB futures contract ended morning trade slightly higher, up 0.02 point at 143.43.

The Ministry of Finance will auction 700 billion yen ($8.9 billion) of 30-year bonds on Thursday, followed by five- and 20-year bond sales next week.

"The 10-year auction was tepid because megabanks weren't big buyers at these yield levels, but the 30-year auction should proceed more smoothly because Japanese insurers want to park funds in superlongs," said a fixed-income fund manager at a Japanese asset management firm in Tokyo.

"If insurers don't buy so much this time, then we can be assured they will buy at the next auction. The superlongs also feel less impact from event risks, such as Europe's debt problems," he added.

The yield curve steepened slightly, with the 20-year JGB yield rising 1 basis point to 1.690 percent and the five-year JGB yield losing half a basis point to 0.215 percent.

The 30-year JGB was untraded.

The spread between 10-year and 20-year yields narrowed to 80.5 basis points, down from the previous session's 13-month high of 82.5 basis points on a last-traded basis.

Market participants remained cautious about the possibility of more bad news from Europe, after Spain warned on Wednesday that it was losing its access to credit markets

Spain asked Europe for help to recapitalise its banks, but sources told Reuters that no decisions can be made until the first phase of an independent banking audit is completed this month.

Copyright Reuters, 2012