Super-long JGBs firmer as govt to boost bonds for stimulus

TOKYO, May 27 (Reuters) – Longer-dated Japanese government bond prices edged higher on Wednesday as investors awaited details of a new $1.1 trillion stimulus package to cushion the economic blow from the COVID-19 pandemic.

To fund the costs, an additional government bond of 31.9 trillion yen ($296.66 billion) will be issued under the secondary supplement budget this fiscal year, a draft obtained by Reuters showed on Wednesday.

Benchmark 10-year JGB futures dropped 0.04 points to 152.3, with a trading volume of 14,912 lots, while the 10-year JGB yield edged down by half a basis point to minus 0.005%.

While some analysts say the debt issuance was well within expectations, others said the additional bond issue was slightly higher than what the market foresaw.

“The first stimulus package mainly involved short- and mid-dated maturities, but in the second stimulus, long and super-long bonds will be expanded to a certain amount as well,” said Naomi Muguruma, a senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

Market players remain worried over supply-demand balance as they await the Bank of Japan’s decision on whether it will increase its bond purchases, analysts said.

In the super-long zone, the 20-year JGB yield fell 1 basis point to 0.330%, while the 30-year JGB yield and the 40-year JGB yield dipped half a basis point to 0.475% and 0.500%, respectively.

Short-dated maturities took a different direction, with the two-year JGB yield rising 1 basis point to minus 0.155% while the five-year yield gained half a basis point to minus 0.130%. ($1 = 107.5300 yen) (Reporting by Eimi Yamamitsu; Editing by Ramakrishnan M.)

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