JGBs rally on relief after 30-year auction attracts strong demand

TOKYO, July 7 (Reuters) – Japanese government bond (JGB) prices gained on Tuesday after an auction of 30-year bonds attracted solid demand, allaying concerns about an increased supply from this month.

The Ministry of Finance’s sale of 30-year JGBs attracted bids 3.92 times the offer of 900 billion yen ($8.37 billion), which was raised from an issuance of 700 billion yen per month since June.

The bid-to-cover was higher than 2.84 times in June while the tail of the auction, the gap between the lowest and average prices, tightened to 0.08 from 0.11 in June.

Analysts said investors were attracted by the new offer as its yield stood near the highest levels in about 16 months.

Despite the solid auction, the road ahead could be bumpy as the government is due to increase sales of other maturities in the coming weeks.

“The pace of issuance will remain high. Although today’s auction was strong, the market could be gradually pressured by increased supplies,” said Keiko Onogi, senior strategist at Daiwa Securities.

Benchmark 10-year JGB futures rose 0.12 point to 151.87, while the 10-year cash JGB yield fell 1 basis point to 0.030%.

The 20-year JGB yield fell 0.5 basis point to 0.435%, while the 30-year yield fell 0.5 basis point to 0.625%.

At the shorter end, the five-year yield fell 0.5 basis point to minus 0.100% but the two-year yield rose 0.5 basis point to minus 0.135%. ($1 = 107.5100 yen) (Reporting by Tokyo Markets Team; editing by Uttaresh.V)

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