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JGBs mostly steady, 5-year auction in focus
August 21, 2012 / 2:56 AM / in 5 years

JGBs mostly steady, 5-year auction in focus

TOKYO, Aug 21 (Reuters) - Japanese government bonds were mostly steady on Tuesday with investors focused on a sale of 5-year notes.

* Ten-year JGB futures ended morning trade flat at 143.47. The 10-year cash yield was also flat at 0.840 percent, after earlier dipping as low as 0.835 percent.

* Yields on the 5-year note were also flat at 0.235 percent.

The Ministry of Finance offered 2.5 trillion of 5-year notes at its monthly auction on Tuesday, a reopening of the Series 105 with a coupon of 0.2 percent. Last month’s sale met robust demand, with a bid-to-cover ratio of 4.44, up from the previous auction’s 3.12.

* “Despite some lingering weakness in the overall tone of the market, yields remain stable and low out to the 3-year sector and potential investor demand for 5’s should still be strong,” said Barclays Securities Japan strategist Noriatsu Tanji in a note to clients.

If long-term yields rise, 5-year yields could follow, but he said any such move should be limited on the assumption that yields will stay in place out to the 3-year sector.

Investors who are bearish on JGBs should consider 5-10-year steepeners, Tanji added.

* The superlong tenor faced mild selling pressure, with yields on 20-year debt adding 1 basis point to 1.680 percent, while yields on 30-year bonds added half a basis point to 1.865 percent.

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