July 17, 2013 / 2:17 AM / 4 years ago

JGBs tread water as investors eye five-year auction

TOKYO, July 17 (Reuters) - Japanese government bond prices made tiny moves in mixed directions on Wednesday, as investors turned their attention to an auction of five-year debt, which was expected to meet decent demand.

* The Ministry of Finance offered 2.7 trillion yen ($27.19 billion) of newly issued five-year notes with a coupon of 0.3 percent, below the 0.4 percent coupons at the past two sales.

* "We expect today's 5-year JGB auction to go smoothly," strategists at Barclays said in a note to clients on Wednesday.

"While fives look rich compared with tens, carry and rolldown is roughly the same and spreads between the total return of fives and bank lending rates are still tight," they added.

* The benchmark 10-year yield was flat at 0.820 percent, while 10-year JGB futures added 0.04 point to 143.15. On Wednesday, only 12,278 contracts changed hands, the lowest since Dec. 25.

* The five-year yield edged down half a basis point to 0.295 percent, not far from a four-week low of 0.290 percent hit on Thursday last week.

* The 30-year yield was flat at 1.850 percent, while the 20-year yield added half a basis point to 1.725 percent.

* According to International Financing Review, a Thomson Reuters publication, morning activity in cash bonds was limited to transactions among dealers. Several bank dealers are likely to buy the new 5-year notes to sell them to the Bank of Japan on Thursday under the central bank's operations for its massive asset-buying stimulus.

* Minutes of the BOJ's June policy-setting meeting released on Wednesday showed some board members proposed offering longer- dated fixed-rate funds in its market operations to curb excessive interest rate fluctuations, but others said the measure could be misinterpreted as a change to the bank's monetary policy framework.

At that meeting, the BOJ left monetary policy unchanged as widely expected, maintaining its pledge to expand the supply of money at an annual pace of 60 trillion to 70 trillion yen to achieve its 2 percent inflation target in two years.

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