JGBs slip but superlongs outperform on month-end buying
TOKYO, June 26 (Reuters) - Benchmark Japanese government bond prices inched down on Wednesday after data showed the U.S. economic recovery gained encouraging momentum, although longer-dated debt firmed slightly on month-end buying by life insurers and pension funds.
* The 10-year yield edged 1 basis point higher to 0.875 percent after easing 2 basis points on Tuesday on concerns that a Chinese central bank engineered cash squeeze to rein in rapid credit expansion could derail growth in the world's second-biggest economy.
* The People's Bank of China said on Tuesday that it had given cash to some institutions facing temporary shortages and would continue to do so if needed, in a bid to further assure markets.
* Orders for U.S. durable goods rose more than expected in May and a gauge of planned business spending gained for a third straight month, while prices of single-family homes posted their biggest rise in seven years in April.
* "I see higher downside risk for JGBs in the next couple of weeks," said Akito Fukunaga, chief rates strategist at Royal Bank of Scotland in Tokyo.
* Fukunaga said JGBs had been relatively stable despite the recent sharp rise in U.S. Treasury yields. "The main reason is that there is no new (JGB) issuance since the FOMC. If we look at the inter-dealer broker market, there is very small volume ... low liquidity, just BOJ buying regularly," he said.
He added that JGBs would face a test when the finance ministry sells 2.4 trillion yen ($24.6 billion) worth of 10-year bonds next Tuesday, followed by an auction of 30-year bonds on July 4.
* Ten-year JGB futures dipped 0.04 point to 142.20.
* Longer-maturities outperformed, with both the 20- and 30-year yields down 0.5 basis point, to 1.725 and 1.845 percent, respectively.
* The spread between 10- and 20-year yield narrowed to 85 basis points after hitting a more than six-week high of 89 basis points on Monday.
* The two-year yield added 1 basis point to 0.145 percent ahead of Thursday's 2.9 trillion yen debt auction of similar maturities.