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JGBs rise, yield curve flattens as US Treasuries gain, stocks slide

Thursday, 23 Jan 2014 | 10:06 PM ET

TOKYO, Jan 24 (IFR) - Japanese government bond prices ended the morning session higher on Friday, flattening the yield curve further.

A sharp fall in U.S. Treasury yields and stock prices overnight had some positive impact on JGBs after Thursday's 20-year JGB auction attracted solid demand from domestic long-term investors.

According to JGB traders, several regional banks and large credit unions persistently sold JGBs in the 5-year to 10-year zone to take profits in the morning session. Some long-term domestic investors continued to buy superlong JGBs in the secondary market, as they had not purchased enough superlong JGBs in Thursday's 20-year sale.

The Bank of Japan offered to buy 200 billion yen ($1.93 billion) in JGBs maturing in more than 10 years in addition to 500 billion yen in the 1-year to 5-year zone under its JGB purchase program.

One megabank, which is said to have purchased more than 300 billion yen in the previous session's auction, was expected to sell part of these to the BOJ today. The bank will also sell them to life insurers and pension funds seeking more superlong JGBs, according to bond traders and money managers.

At midday, the yield on the current 5-year JGBs was unchanged on the day at 0.200 percent, while the 10-year yield slipped 1.5 basis points to 0.640 percent, compared with 0.635 percent earlier.

In the superlong zone, the 20-year yield fell 3 basis points to 1.465 percent, its lowest level since Oct. 24, while the 30-year yield slumped 3.5 basis points to 1.625 percent, its lowest level since Nov. 28.

Lead March JGB futures moved in a 144.52-144.65 range before finishing the morning session up 0.17 point at 144.52.