Business & Finance

JGBs dip ahead of 10-year bond auction

Published Updated

The 10-year JGB yield ticked up 0.5 basis point to 0.830 percent, while that of longer-dated 30-year bond also added 0.5 basis point, to 1.865 percent. The yield on 20-year bond was up 1 basis point to 1.650 percent.

"Today's auction is a good opportunity to buy nine- and 10-year asset swaps," said Neale Vincent, a strategist at Nomura Securities.

The Ministry of Finance is to sell the 2.3 trillion yen ($28.99 billion) worth of 10-year bonds at a coupon of 0.8 percent, 10 basis points below the last two auctions of similar maturity.

The 10-year JGB futures were down 0.11 point at 143.66, breaching their 20-day moving average.

Morgan Stanley MUFG recommended a barbell position in 2- and 10-year bonds as alternative to an intermediate 5-year bullets, saying there was a 20-basis point pick up over the medium-term debt.

"While 10-year JGBs do offer a comparatively decent cushion of around 10 basis points over a six-month horizon, the breakeven yield of 0.95 percent is perhaps too low to justify aggressive outright buying," Morgan Stanley MUFG said in a note.

"Those who are keen to take an outright JGB-long position in anticipation of a further rally should favour the superlong sector - which has greater room for yields to fall and should also perform relatively well in the event of a market selloff - over the rich-on-the-curve long-term sector.

Copyright Reuters, 2012