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Japan govt bonds show

downward movement

TOKYO: Key Japanese government bond futures ended Tokyo at a day low with sentiment hurt by increasing supply, including today's sales of 600 billion yen in four-year government notes, up on the previous 500 billion.

"Yen bonds were sold this afternoon on the weakening yen, higher Tokyo stocks and uneasiness over an increased volume of four-year notes," said a senior trader at a major brokerage house. Before the note sales, sentiment had already been overshadowed by a recent rush of corporate bond issues.

The Key December futures contract ended 0.49 down at 116.51. Its high was even with Monday's close at 117.00.

Turnover was a moderate 38,313 contracts.

A Ministry of Finance (MOF) official said the ministry increased its offered volume of 1.8 percent four-year notes to help the market prepare for trading the new five-year JGB futures contract, which is likely to start later this year.

But the increase was not welcomed, particularly this time because city banks, usually big buyers of medium-term notes, had been expected to buy few ahead of half-year book closings.

As expected, some major city banks bought none, dealers said. The results of the price competitive auction were worse than previously, they said.

The auction produced the lowest price of 99.48 or stop rate of 1.939 percent and average price at 99.61 or average yield at 1.903 percent.

But the results were better than some had expected, deterring the contract from falling further, dealers said.

Sales of medium-term corporate bonds including Nissan Motor Co's were not going well, dealers said. Nissan launched five-six-and seven-year bonds of 20 billion yen each on Monday.

The benchmark 174th 10-year JGBs yielded 3.200 percent at 0756 GMT against Monday's 3.135 percent close.-Reuter