JGBs lose gains led by bouncing Tokyo shares (Reuters) (01-03-2011)

TOKYO - Japanese government bonds slipped on Tuesday, weighed down by a bounce in Tokyo shares, while a subdued debt auction underscored the market’s jitters as it tries to assess the longer-term impact of overseas and domestic events.

Unrest in North Africa and the Middle East and a spike in the price of oil had buoyed perceived havens such as JGBs last month, but this week's rebound in Tokyo equities suggested that an upbeat scenario for riskier assets remained bruised but intact.

A 2.2 trillion yen ($27 billion) 10-year debt sale drew subdued demand against such a background, with the tail, widening to 0.09 from 0.06 at the previous auction in February.

March 10-year JGB futures rose 0.19 point to 139.35 while the 5-year yield climbed 1 basis point to 0.555 percent.

The 10-year yield rose 1.5 basis points to 1.270 percent, although it was still some distance from a 10-month high of 1.350 percent struck last month before unrest in the world's oil-producing regions dampened global economic growth prospects.

The 20-year yield climbed 3.5 basis points to 2.035 percent, pushing the 10-year/20-year yield spread to 76.5 basis points and further away from a five-month trough of 70 basis points hit last month.

Source: Reuters