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JGBs mostly down, investors position for 10-year sale

TOKYO, May 8 (IFR) - Japanese government bond prices ended Thursday's morning session mostly lower, sending yields up slightly as investors positioned for the day's 10-year sale.

Domestic real money accounts adopted a wait-and-see stance ahead of the monthly 2.4 trillion yen ($23.60 billion) offering of 10-year JGBs. As widely expected, the Ministry of Finance set the coupon of the new 10-year JGBs at 0.6 percent for the seventh straight month, re-opening the current issue number 333 for the second time.

The payment date is May 12, the regular settlement date, meaning JGB investors have no need to adjust yields between the current issue and the new one.

Dealers and megabanks are expected to buy the new 10-year JGBs at the current levels in relatively large lots in order to cover their short positions, and to sell some JGBs to the Bank of Japan in its anticipated JGB-buying operations on Friday, JGB traders said.

Several regional banks may buy the new 10-year JGBs in the post-auction secondary market to prepare for the large quarterly redemption on June 20.

Ahead of the auction results, the yield on the current 10-year JGBs was up 0.5 basis point at 0.600 percent, while the 20-year yield also rose 0.5 basis point to 1.460 percent. The 30-year yield was flat at 1.695 percent.

Ten-year lead June JGB futures moved in an extremely narrow 145.13-145.18 range before finishing at midday down 0.08 point at 145.13. ($1 = 101.7150 Japanese Yen)

(Reporting by Masatsugu Hisatsune; Editing by Shri Navaratnam)