TOKYO (Thomson Financial) - Japanese government bond prices closed mostly higher Tuesday, mirroring gains in US
Treasuries, while investors waited for the auction of five-year bonds tomorrow.
The Ministry of Finance will offer 2.0 trillion yen worth of five-year JGBs and investor demand is expected to be solid.
"Japan's bond market was indirectly supported by the AIG news through gains in US Treasury
prices as the disclosure triggered flight-to-quality buying," said Naomi Hasegawa, senior strategist at Mitsubishi UFJ Securities.
Long-term Treasury prices rose Monday after news of problems at American International Group Inc again raised concerns about risky low-quality debt.
The insurer said it will make more information public about the methods it used to value collateralized debt obligations, or CDOs. These assets are a major concern to investors because CDOs contain some subprime debt instruments that are likely to default and it is widely suspected their current prices do not reflect that liability.
Apart from what happened on the Treasury market overnight, there were no strong trading leads in Japan, said Hasegawa.
"There has been a recent pattern where the market is stuck in narrow ranges once the price of the bond futures reach around 138.10-15 yen and the yield (on 10-year bonds) is at 1.4 percent," said Hasegawa.
The yield on the benchmark 10-year bond fell to 1.400 percent from 1.420 percent Friday.
The yield on the two-year note was flat at 0.550 percent, while the yield on the five-year bond inched down to 0.870 percent from 0.880 percent.
The yield on the 20-year bond dipped to 2.065 percent from 2.080 percent and the yield on the 30-year bond dropped to 2.330 percent from 2.345 percent.
Bond prices move inversely to yields.
The price of the March futures contract for the 10-year bond rose to 138.13 yen from 137.95 yen.
Japan's financial markets were shut on Monday for a national holiday.
(1 US dollar = 106.96 yen)
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