Super-long JGBs gain, shorter tenors weak as market adjusts to issuance plans

TOKYO, June 26 (Reuters) - The longest-dated Japanese government bonds gained on Thursday, pushing yields lower, while shorter-dated securities edged down as markets continued their adjustment to the finance ministry's revised issuance plans.

At the same time, a smooth auction of two-year notes during the session offered some support for those securities.

In a draft plan reported by Reuters a week ago, the ministry will reduce sales of so-called super-long bonds by about 10% from its original plan. Overall issuance will be lower, but some of the reduction in the super-long sector will be made up with increased issuance of short-term debt.

The two-year JGB yield JP2YTN=JBTC was flat at 0.715% following the auction results, undoing an earlier 0.5 basis point (bp) rise.

"Going forward, the trajectory of (two-year JGB) yields will hinge chiefly on two catalysts: movements in medium-term U.S. Treasury rates, which remain susceptible to political developments, and evolving market expectations surrounding the Bank of Japan's policy rate," said Shoki Omori, chief desk strategist at Mizuho Securities.

"Should expectations for policy rates shift, yields could well climb further."

Markets currently see only 46% odds of the BOJ raising rates again by year-end amid the uncertainty caused by U.S. trade tariffs.

The five-year JGB yield JP5YTN=JBTC rose 1 bp to 0.955%, and the 10-year yield JP10YTN=JBTC added 0.5 bp to 1.40%.

Benchmark 10-year JGB futures 2JGBv1 edged down 0.02 yen to 139.39 yen.

By contrast, the 20-year JP20YTN=JBTC and 30-year JP30YTN=JBTC JGB yields each slid 1.5 bps, to 2.30% and 2.885%, respectively.