January 28, 2020 / 6:44 AM / a month ago

JGBs steady to slightly weaker, virus fallout in focus

TOKYO, Jan 28 (Reuters) - Japanese government bond prices steadied on Tuesday after rallying for more than a week as investors assessed the extent of the coronavirus outbreak in China and elsewhere.

An auction of 40-year JGBs drew lukewarm demand, underscoring the view that few investors were willing to buy that maturity beyond the yield of about 0.4%.

Benchmark 10-year JGB futures fell 0.06 point to 152.54. On Monday the futures rose to 152.70, the highest level since early December as investors sought safety of bonds on worries about the virus.

The 10-year JGB yield rose 0.5 basis point to minus 0.045%, still not far from seven-week low of minus 0.050% touched on Monday.

The 20-year JGB yield was flat at 0.235% while the 30-year yield rose 0.5 basis point to 0.375%.

The 40-year JGB yield was flat at 0.395% after falling to as low as 0.385% earlier, its lowest since Nov. 1.

The auction of 400 billion yen ($3.65 billion) 40-year JGBs on Tuesday produced an outcome that was roughly in line with expectations.

The bid-to-cover was 2.86, much lower than 3.50 in the previous auction in November, highlighting lack of strong appetite at current yield levels near three-month lows.

The two-year JGB yield rose 1 basis point to minus 0.135% while the five-year yield rose 1 basis point to minus 0.135%.

The market showed little reaction to news that Japan’s government nominated Seiji Adachi, an economist known as a proponent of aggressive monetary easing, to join the Bank of Japan’s nine-member board to replace Yutaka Harada.

The nomination is unlikely to tip the balance of the board given the outgoing member is a policy dove.

JGBs underperformed compared with their global peers. U.S. bonds gained sharply on Monday, pushing the 10-year Treasuries yield down more than 5 basis points to a three-month low below 1.6%.

$1 = 109.70 yen Reporting by Tokyo Markets Team; Editing by Aditya Soni

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