Ten-year JGBs dip ahead of auction, U.S. data; superlongs firm

* 10-yr yield at 3-wk high after selling ahead of auction

* Caution over U.S. jobs data

* Superlongs firm, 10-/30-yr yield spread tightened

By Akiko Takeda

TOKYO, April 1 (Reuters) – Ten-year Japanese government
bonds yield climbed to a three-week high on Friday as investors
took profits ahead of a bond sale next week, while bonds with
longer maturities were firm as investors shifted funds from
medium-term notes.

Although superlong bonds had been hurt by worries about
Japan’s increased fiscal burden after the earthquake, investors
may have been relieved by comments from policy-makers that they
will not take steps that would erode market confidence.

Market participants doubted the government would seek to
pass a bill to allow the Bank of Japan to underwrite bonds, as
reported by the Nikkei business daily, as Economics Minister
Kaoru Yosano and Finance Minister Yoshihiko Noda both made
denials on Friday. [ID:nL3E7F105M]

“At this stage ministers are against the idea, and the
market thinks the possibility is very low,” said Takafumi
Yamawaki, chief rate strategist at JPMorgan.

Market participants were also cautious over U.S. jobs data
on Friday that some are betting it will show much higher job
growth for March than economists’ consensus estimates of
190,000.[ID:nN31275912]

“Trading volume improved somewhat from earlier this week as
a new fiscal year started today, but the market was still quiet.
In such an environment futures tend to take their cue from U.S.
Treasuries,” a fund manager in Japanese asset management said.

“Investors were cautious that JGB yields might be pushed up
along with those of treasuries after a release of U.S. data that
suggests job growth.”

June 10-year futures (2JGBv1: Quote, Profile, Research) were down 0.36 point at 139.19
after earlier dropping to 139.15, the lowest in three weeks.

The 10-year yield climbed 3.0 basis points to
1.280 percent, the highest in three weeks. The five-year yield
rose 1.5 basis points to 0.505 percent.

Market players said the 10-year bond yield faced upward
pressure as the maturity saw some selling as participants such
as Japanese banks made room on their books ahead of a 10-year
auction on Tuesday.

The market remained focused on the size of the Japanese
government’s emergency budgets and possible bond issuance for
disaster relief, and developments at the quake-stricken nuclear
plant in Fukushima, northeast of Tokyo.

But superlongs — bonds with maturities over 10 years —
bucked the trend in other maturities as investors were seen
taking profits in medium-dated bonds and shifting money to
superlongs. The 30-year yield edged down 0.5
basis point at 2.170 percent. The 10-year/30-year yield spread
tightened to 89.0 basis points, the lowest since March 10, the
day before the earthquake struck.

There was a limited reaction in JGB markets to the Bank of
Japan’s closely watched tankan survey on Friday. Japanese
manufacturers’ business sentiment improved slightly in the three
months to March, but analysts anticipate a downturn in
confidence this quarter following last month’s devastating
earthquake and tsunami and subsequent nuclear crisis.
[ID:nTKB007416]

But markets were wary over the central bank’s plan to issue
figures on Monday showing tankan results based on data collected
after the quake.

(Additional reporting by Takahiro Okamoto, a senior rates
analyst at IFR Markets; Editing by Michael Watson)

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Ten-year JGBs dip ahead of auction, U.S. data; superlongs firm