CORRECTED-Japan benchmark bonds rise as debt demand concerns ease

By Rocky Swift

TOKYO, Jan 8 (Reuters) - Benchmark Japanese bonds rose on Thursday as concerns eased over market appetite for government debt.

The 10-year Japanese government bond (JGB) yield JP10YTN=JBTC slipped 3.5 basis points (bps) to 2.085%.

Following moderately firm demand at a 10-year bond sale on Tuesday, the first auction of the year, the Ministry of Finance sold about 700 billion yen ($4.47 billion) in 30-year JGBs.

The auction's bid-to-cover ratio, a measure of demand, was 3.14, down from the six-year high seen at the sale in December though on par with recent sales.

Separately, government data showed that foreign investors bought approximately 273.5 billion yen worth of Japanese long-term debt securities in the week through January 3, their first weekly net purchase since December 13.

Long-term JGB yields have risen sharply since early November, reaching successive record highs, on concerns over the scale of Prime Minister Sanae Takaichi's spending plans.

Short-term yields have faced upward pressure as the Bank of Japan raised policy rates and signalled more hikes were on the way.

Addressing worries in the market, the government decided to curtail issuance of super-long-term debt next fiscal year to the lowest in 17 years.

"Uncertainty around supply–demand factors in the super-long sector has subsided," Barclays analysts Ayao Ehara and Shinichiro Kadota wrote in a note before the auction.

The 30-year JGB yield JP30YTN=JBTC rose 1.5 bps to 3.515%, nearing the record 3.52% reached on Wednesday. The 40-year JGB yield JP40YTN=JBTC rose 4.5 basis points to 3.775%, an all-time high.

The 20-year yield JP20YTN=JBTC fell 1 bp to 3.080%. The two-year JGB yield JP2YTN=JBTC fell 3 bps to 1.135%, while the five-year yield JP5YTN=JBTC fell 3.5 bps to 1.545%.

($1 = 156.7700 yen)