November 2, 2018 / 7:22 AM / 18 days ago

JGBs slightly weaker on hopes of China-U.S. trade rapprochement

TOKYO, Nov 2 (Reuters) - Japanese government bonds ended slightly weaker on Friday as hopes that leaders of the United States and China may be working towards a trade deal ahead of their meeting later this month boosted equities, undercutting the attraction of bonds.

U.S. President Donald Trump and Chinese President Xi Jinping expressed optimism on Thursday about resolving their bitter trade dispute while Bloomberg reported Trump has asked key U.S. officials to begin drafting potential terms.

Ten-year JGB futures fell 0.01 point to 150.64 while the benchmark 10-year cash JGB yield rose 0.5 basis point to 0.125 percent while the 20-year JGB yield rose 0.5 basis point to 0.655 percent.

The 30-year JGB yield rose 0.5 basis point to 0.875 percent.

Japanese shares posted biggest daily gains since March.

The Bank of Japan, conducting its first bond purchase operation after Thursday’s announcement of small technical tweaks, bought 350 billion yen ($3.10 billion) of JGBs with one- to three-years maturity and 400 billion yen of JGBs with three- to five-years maturity.

If the central bank maintains the latest buying size, its total purchases of one- to five-year JGBs will be cut to 3 trillion yen in November from 3.25 trillion yen in October.

But the market took that in its stride as the stance was in line with the BOJ’s gradual and stealth tapering since 2017.

The benchmark two-year JGB yield fell 0.5 basis point to minus 0.135 percent while the five-year JGB yield rose 0.5 basis point to minus 0.080 percent. (Reporting by Tokyo Markets Team; Editing by Sunil Nair)

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