JGBs dip modestly, ahead of 40-year debt sale, as stocks rally

TOKYO, Nov 25 (IFR) - Japanese government bond prices eased modestly on Monday, ahead of an auction of 40-year debt in the following session, as Tokyo stocks rallied on a slump in the yen to a six-month low.

As widely expected, the Bank of Japan offered to buy 950 billion yen ($9.4 billion) worth of JGBs in the secondary market with residual maturities of one to 10 years, as part of its aggressive plan to pull the world's third-largest economy out of persistent deflation.

Some market participants seemed eager to sell JGBs at higher prices to the BOJ in the secondary market.

The 10-year yield added 0.5 basis point to 0.630 percent, while the 10-year JGB futures were little changed at 144.78.

A bullish curve-flattening bias in the U.S. Treasuries last Friday had limited positive impact on JGBs, as the yen slid to a six-month low of 101.81 yen to the dollar and a four-year low of 137.93 to the euro.

The weaker yen helped lift currency-sensitive exporter shares in the Nikkei share average, which climbed 1.3 percent to a six-month high on Monday morning, undermining the appeal of government bonds.

The 20-year JGB yield was also up 0.5 basis point, at 1.505 percent.

The 30-year yield edged up 1 basis point to 1.670 percent, however, leading to a slight steepening of the yield curve.

The Ministry of Finance is to sell 400 billion yen of 40-year bonds on Tuesday.