JGBs rise as stocks slip, investors await five-year debt auction

By Rocky Swift

TOKYO, June 19 (Reuters) - Japanese government bonds crept higher on Thursday, supported by a decline in domestic shares and caution ahead of a five-year debt auction.

The five-year yield JP5YTN=JBTC fell 1.5 basis points (bps) to 0.99%. The 10-year yield JP10YTN=JBTC slipped 1 bp to 1.445%. The Nikkei share .N225 gauge slid 0.7%.

There has been extra scrutiny of sales of JGBs after weak demand at auctions last month triggered a surge in long-term yields to record levels.

The Ministry of Finance is expected to reduce its issuance of longer-dated bonds to support demand, which would be counterbalanced by increased sales of shorter-dated notes.

Bonds have also been under pressure in Japan and other major markets as investors grew wary about widening fiscal deficits and debt piles. Japanese lawmakers are mulling cash handouts and other stimulus to woo voters ahead of an upper house election slated for July.

Under a plan laid out last July, the Bank of Japan has been slowing its monthly bond purchases by around 400 billion yen steps each quarter. The central bank said on Tuesday the tapering pace will slow to 200 billion yen step changes per quarter from next April.