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JGBs marginally up, but trade subdued in Tokyo

TOKYO: Key June 10-year Japanese government bond futures 0 JGB: ended marginally firmer on Thursday, but trade was largely subdued as most participants refrained from active trade ahead of book-closing on March 31.

Traders said a strong auction result the day before supported overall sentiment throughout the day, but futures shied away from stiff resistance of 131.00.

"Market sentiment isn't bad, it's just that we're again back in the pre-book closing mode," said a foreign bank trader.

The contract moved in a tight range of 130.80 and 130.97, and its trade volume was light 17.046 lots, lowest since February 23.

June futures ended at 130.86, up 0.01 point from Wednesday's close in Tokyo.

The yield on the new 221st 10-year was at 1.845 percent, unchanged from Wednesday. Traders said subdued and rangebound trade was likely to continue until the fiscal year-end.

"Basically, everyone wants to close their positions now, so the whole of trade is just a repetition of selling on rallies, and covering short positions on dips," said one trust bank trader.

June futures rose shortly after the opening, carrying over sentiment from the previous day, but struggled to extend gains amid the yen's weakness, traders said.

Wednesday's 10-year JGB auction met brisk demand with a bid-to-cover ratio of 3.05, the highest since a 10-year bond auction in September 1998, and with a tail of four basis points.

But investors also grew cautious about chasing government bond prices higher as the yield on the 221st 10-year JGB dipped toward the closely watched 1.8 percent level.

Traders were also growing cautious as the April 3 release of the key "tankan" business sentiment survey draws near -- especially after recent bullish economic data.

Capital spending rose in the final quarter of 1999, leading the Economic Planning Agency and the central bank to upgrade slightly their assessments of the economy. The Finance Ministry announced on Thursday it would raise the issuing volume of two-year government notes to 1.2 trillion yen from one trillion -- scheduled for next Thursday.

The move was widely expected after the ministry said last December it would start raising the amount of two-year notes issued.

The MOF will also offer 900 billion yen in five-year government bonds via auction next Tuesday.

September TIBOR-based euroyen futures were at 99.665, unchanged from Wednesday's day-session settlement.

The key unsecured overnight call rate was mainly traded at 0.02 percent, unchanged from Wednesday's weighted average rate.

The Bank of Japan said its current account balances, or broadly defined money market liquidity, were expected to be unchanged from the day before following Thursday's regular 0020 GMT operation. Calculated under the previous method, the BOJ operation left a projected net surplus of 1.6 trillion yen, money market dealers said.-Reuters