JGBs little changed, underpinned by decent 2-year sale

[TOKYO] Japanese government bonds wavered in narrow ranges on Tuesday, underpinned by decent demand at a two-year auction but lacking incentives as trade waned in the final days of the year.

The benchmark 10-year yield edged up 0.5 basis point (bp) to 0.060 per cent, while 10-year JGB futures finished up 0.01 point at 149.82.

The Ministry of Finance offered 2.3 trillion yen (S$28.3 billion) of 2-year JGBs with a 0.10 per cent coupon. The sale produced a highest yield of minus 0.154 per cent, with 34.7133 per cent of the bids accepted at the lowest price of 100.510.

The sale drew bids of 4.51 times the amount offered, up from the previous sale's bid-to-cover ratio of 4.27 times, indicating stronger demand for the bonds, even though the tail between the average and lowest accepted prices widened slightly to 0.006 from 0.004 at last month's offering.

The 2-year yield edged up 0.5 (bp) to minus 0.175 per cent.

The JGB market shrugged off price data released by the central bank earlier on Tuesday. Japanese consumer prices rose 0.2 per cent in November from a year earlier when stripping away the effect of energy and fresh food costs, an indicator released by the Bank of Japan showed on Tuesday.

Japanese bonds often take directional cues from US Treasuries, but the US bond market was closed on Monday for the Christmas holiday. Many investors will be away for year-end holidays this week, meaning activity is likely to remain thin.

The Osaka Exchange said late on Tuesday that trading in JGB futures and options was halted at 0625 GMT due to a technical glitch.

REUTERS