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JGB prices dip ahead of 30-year debt auction

Monday, 9 Dec 2013 | 9:24 PM ET

TOKYO, Dec 10 (Reuters) - Japanese government bond prices edged higher on Tuesday, with the longer-dated sectors underperforming ahead of an auction of 30-year debt later in the day.

The Ministry of Finance was to sell 600 billion yen ($5.8 billion) worth of 30-year JGBs on Tuesday.

Yields on existing 30-year JGBs rose 1.5 basis points to 1.685 percent, while the 20-year yield was up 2 basis points at 1.520 percent.

"Thirty-year yields have exceeded 1.65 percent, their highest level at auction time since September. Given the trend of the past several months, this should be an adequate level for dip-buying," Barclays Capital said in a note.

But analysts from Morgan Stanley MUFG said they continued to recommend going short the 30-year sector, saying it expected the long-end of the yield curve to face steepening pressure as the Bank of Japan's efforts to achieve a 2 percent inflation target push up forward long-term rates.

The BOJ stunned the financial markets on April 4, promising to inject $1.4 trillion into the world's third-largest economy in less than two years.

The 10-year JGB yield added 1 basis point to 0.665 percent. So far this year, the benchmark yield has fallen 13 basis points, heading for a fourth straight year of decline.

Ten-year JGB futures dipped 4 ticks to 144.67.

The five-year yield inched up 0.5 basis point to 0.195 percent, though not too far from a 7-1/2-month low of 0.180 touched late last month.

Earlier, a government survey showed large Japanese manufacturers grew less optimistic about business conditions in October-December, in a sign that domestic demand may be faltering.