JGBs flat to weaker; Nikkei rally offsets solid sale

* JGBs trim or pare losses as 30-year sale draws solid demand

* But a 1.9 pct Nikkei rally prevents a full-fledged bounce

* 30-year auction attracts strongest demand since 2002

* Yen swaption premiums edge down a bit

By Shinichi Saoshiro

TOKYO, Oct 14 (BestGrowthStock) – Japanese government bonds were flat
to a touch weaker on Thursday, with bonds paring earlier losses
on a solid 30-year debt sale, although a surge in Tokyo stocks
prevented the market from making further headway.

Thursday’s 600 billion yen ($7.3 billion) 30-year JGB tender
attracted solid demand, with the bid-to-cover ratio, a gauge of
demand at auctions, rising to an eight-year high of 5.40 from
4.15 at the last offering in September. [ID:nMOFJN5002]

The benchmark 10-year JGBs reversed losses after the results
which showed that superlong yields had climbed high enough after
a long battering to attract demand from some buy-and-hold
investors.

But a rally in Tokyo’s Nikkei (.N225: ), which took place
despite the yen’s surge to a 15-year high against the dollar,
prevented JGBs from a full-fledged bounce. [.T]

“The sight of stocks rising along with the yen made JGB
players a little nervous, as that had not happened in a while,”
said a trader at a European securities house.

“This opened the way for players to take profits by selling
superlongs after the strong auction, although some quickly bought
them back on price dips.”

The 30-year yield (JP30YTN=JBTC: ) rose 3 basis points to 1.965
percent after hitting 1.975 percent. The 20-year yield
(JP20YTN=JBTC: ) was up 1.5 basis points at 1.750 percent after
hitting 1.770 percent.

The 10-year/30-year yield spread has widened to a 2-