October 4, 2017 / 7:06 AM / a year ago

JGBs gain as investors cover short positions

TOKYO, Oct 4 (Reuters) - Japanese government bond prices gained on Wednesday as investors bought back bonds sold after the previous session’s disappointing 10-year sale.

The 10-year cash JGB yield fell 1.5 basis points to 0.055 percent, moving away from the previous session’s high of 0.080 percent, which was its highest level since July 26.

The 10-year JGB futures contract finished up 0.25 point at 150.48.

“It’s mostly a short-covering rally, but it might have a bit more legs on which to run,” said Tadashi Matsukawa, head of fixed income investment at PineBridge Investments in Tokyo.

“Banks are apparently buying again in the beginning of the new Japanese fiscal half” which began this month, he added.

Some investors also likely bought on dips after the previous session’s tepid 10-year sale, at which the lowest accepted price came in below dealers’ expectations.

In the superlong zone, the 20-year JGB yield shed 1.5 basis points to 0.580 percent, while the 30-year JGB yield gave up 1 basis point to 0.870 percent.

The Bank of Japan’s regular buying operations underpinned market sentiment on Wednesday as the central bank continued to buy bonds at the same volume as previous operations.

It offered to buy 280 billion yen ($2.49 billion) of one- to three-year JGBs, 300 billion yen of three- to five-year JGBs and 410 billion yen of five- to 10-year JGBs, in line with its previous level of buying in those maturities.

$1 = 112.5100 yen Reporting by Tokyo markets team; Editing by Eric Meijer

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