Japan 20-Yr JGBs Draw Firm Demand; Tail Narrows; Futures Rise

     TOKYO (MNI) - The results of the new 20-year Japanese government bond

auction on Tuesday were stronger than expected, triggering short-covering on

September 10-year bond futures.

     September bond futures rose to 150.79 immediately after the results from

150.65 traded before the results.

     Earlier at midday, the September bond futures contract closed down 0.04

from Monday's close at 150.73.

     The tail stemming from the gap between the average and accepted lowest

prices narrowed to 0.03 from 0.08 at the previous auction in July. A smaller

number means that investor demand is stronger.

     The Ministry of Finance sold Y813.3 billion of the 20-year bonds, with the

lowest accepted price of 100.85, higher than market expectations of between

100.70 and 100.75.

     The new issue carries a coupon of 0.6%, unchanged from that for the current

20-year bonds.

     Bids totaled Y3.6652 trillion, making the bid-to-cover ratio 4.51, up from

4.19 at the previous similar auction in July.

     JGB investors who bought the new 20-year bonds at the auction are expected

to try to sell them at higher prices to the Bank of Japan on Wednesday, when it

conducts outright bond-buying operations.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532-5998; email: vince.morkri@marketnews.com

[TOPICS: M$A$$$,M$J$$$,M$$FI$,MN$FI$]