Longer-dated JGBs dip ahead of 30-year sale; 10-year steady


TOKYO, Oct 11 (Reuters) - Longer-dated Japanese governmentbonds slumped on Thursday ahead of a 30-year sale that wasexpected to meet firm demand in light of that sector's recentunderperformance.

* The Ministry of Finance is offering 700 billion yen ($8.9billion) of 30-year bonds with a coupon of 1.90 percent,matching that of the previous sale, which had drawn decentdemand.

* "We are not expecting an eventful auction," said afixed-income fund manager at a Japanese asset management firm.

"It would be very surprising if there was little demand atthese levels, after superlongs have underperformed in recentweeks," he said.

* The yield curve has steepened this week ahead of theauction as investors sold to make room in their portfolios tobuy at the auction.

The spread between the 10-year and 30-year yields rose to1.17 percentage points on Thursday, its widest since March 2008.

* Yields on 30-year debt rose 1.5 basispoints in cash trading to 1.940 percent, while those on 20-yearbonds rose half a basis point to 1.660 percent.

* The benchmark 10-year yield was flat at0.765 percent.

* Ten-year JGB futures ended morning trade up 0.03point at 144.21, after trading in a narrow range between 144.19and 144.24.

If futures' five-day moving average were to cross below the200-day moving average, that might be a bearish technicalsignal. The five-day average is now at 144.16 and the 200-dayaverage is at 144.12.

* "We continue to recommend buying 30-year asset swaps,which remain attractively cheap and appear likely to outperformin the event of JGB market selloffs," Morgan Stanley MUFGstrategists said in a note to clients ahead of the 30-year sale.

They added that 30-year asset swaps offer around 1 basispoint of carry over a half-year period, which would make themsuitable for bearish positioning in the longer term.

($1 = 78.085 Japanese yen)

(Reporting by Lisa Twaronite; Editing by Chris Gallagher)

((lisa.twaronite@thomsonreuters.com)(81 3 6441 1870 ReutersMessaging: lisa.twaronite.thomsonreuters.com@reuters.net))


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