March 7, 2018 / 5:57 AM / 5 months ago

Short-dated JGBs soften ahead of auction, long-dated bonds firmer

TOKYO, March 7 (Reuters) - Short-dated Japanese government bond yields rose on Wednesday ahead of an auction later this week, while longer-dated bond yields dipped as the Bank of Japan’s buying operation highlighted limited selling interest.

The two-year JGB yield rose 1.0 basis point to minus 0.160 percent, while the five-year JGB yield rose 0.5 basis point to minus 0.115 percent.

Market players sold short maturities ahead of Thursday’s liquidity-enhancing auction, where the Ministry of Finance will offer additional 300 billion yen of existing JGB with more than one-to-five years maturity.

A sense of glut was evident when the BOJ’s buying operation in the same maturity zone on Wednesday produced weaker-than-expected pricing.

In contrast, the BOJ’s purchase of JGBs worth 190 billion yen with 10 to 25 years to maturity drew selling of 366.4 billion yen, the lowest amount in that maturity zone since July 7, underscoring lack of selling interest.

The 20-year yield was flat at 0.745 percent, while the 30-year yield dipped 1.0 basis point to 0.865 percent .

The price of 10-year JGB futures were up 0.02 point at 151.01 in late trade. The contract opened higher after resignation of top White House economic adviser Gary Cohn dented risk sentiment, before erasing gains on wariness ahead of the auction.

The 10-year cash bond yield stood flat at 0.050 percent . (Reporting by Tokyo Markets Team, Editing by Sherry Jacob-Phillips)

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