June 21, 2017 / 4:31 AM / 2 months ago

Long-dated JGBs follow Treasuries higher, yield curve flattens

TOKYO, June 21 (Reuters) - Longer-dated Japanese government bond prices gained on Wednesday, tracking overnight gains in U.S. Treasuries, causing the yield curve to flatten.

The benchmark 10-year JGB yield was unchanged at 0.050 percent, while the 30-year yield fell a basis point to 0.790 percent.

The JGB yield curve mirrored overnight moves by U.S. Treasuries, which saw the yield curve flatten as more hawkish Federal Reserve officials led intermediate-dated notes to underperform long-term bonds, which are being supported by falling inflation.

Superlong JGBs such as the 20- and 30-year tenors also drew support from firm domestic demand.

Data released on Tuesday by the Japan Securities Dealers Association showed that large domestic banks bought a net 521.6 billion yen ($4.69 billion) of superlongs in May.

In the past, domestic banks were not keen investors in superlong JGBs due to the duration risk associated with these maturities. But they have moved down the curve in search of higher yields, with even the benchmark 10-years not yielding much above zero percent under the Bank of Japan's extensive monetary easing.

$1 = 111.2100 yen Reporting by the Tokyo markets team; Editing by Sunil Nair

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