JGB yields fall on demand for portfolio adjustment

By Junko Fujita

TOKYO, Feb 27 (Reuters) - Japan's government bond (JGB) yields fell on Friday, supported by periodic demand from investors who track bond indexes to adjust their portfolio durations.

The 10-year JGB yield JP10YTN=JBTC fell 3 basis points (bps) to 2.120%.

The 20-year JGB yield JP20YTN=JBTC dropped 4 bps to 2.925%. The 30-year yield JP30YTN=JBTC fell 3.5 bps to 2.925%.

Investors tend to buy longer maturity bonds at the end of the month as they need to match their durations with the benchmark bond indexes, which replace bonds with short maturities with longer ones ahead of the redemption of some government bonds.

The demand for bonds increases especially at the end of February as large amounts of JGBs mature in March. A big volume of bonds also matures in June, September and December.

The yield on the 40-year JGB JP40YTN=JBTC fell 5.5 bps to 3.55%.

Tokyo price data released earlier in the day showed the pace of price rises fell below the Bank of Japan's 2% target for the first time in 16 months.

"The market had expected the price to slow. Rather, the data was above the market expectations," said Shinji Ebihara, chief fixed income strategist at Tokio Marine Asset Management.

The two-year yield JP2YTN=JBTC fell 1 bp to 1.225% and the five-year yield JP5YTN=JBTC fell 1.5 bps to 1.590%.