PREVIEW-JGB 10-year notes most at risk as Japan ramps up supply

Wed Jun 24, 2009 11:30pm BST
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* Expanded bond sales kick off this week to fund stimulus

* 10-year JGBs seen most at risk from surge in supply

* 2-year and super-long bond sales unlikely to batter market

* Market may have to worry about more supply later (Repeats ahead of auction on Thursday)

By Shinichi Saoshiro

TOKYO, June 24 (Reuters) - Japan will start selling an additional 16.9 trillion yen ($177 billion) in bonds at a two-year auction on Thursday to pay for fiscal stimulus plans, but dealers are more worried about a big sale of benchmark 10-year notes next week.

The government plans to sell the additional bonds through its regularly scheduled debt auctions.

The expanded sale of two-year bonds on June 25 is expected to draw solid demand from banks, which are flush with cash and tend to keep their portfolios concentrated in more liquid, short-term notes.

But questions hang over how well the extra supply of 10-year JGBs will be received on July 2. That maturity does not have the same kind of core buy-and-hold clientele as other points on the yield curve, though banks and institutions are active in it.  Continued...

 
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