* JGB upside capped ahead of 20-year auction on Thursday
By Shinichi Saoshiro
TOKYO, Nov 19 (Reuters) - Japanese government bonds edged up
on Wednesday following an overnight rise in U.S. Treasuries, but
gains were capped ahead of a 20-year JGB auction the following
day.
JGB gains were also limited as the market braced for the
government to increase bond issuance in the next fiscal year that
starts in April.
Analysts expect Japan to increase JGB issuance as the country
is projected to have a tax revenue shortfall and stimulus
packages may be needed to help a flagging economy.
Data released on Monday showed that Japan's gross domestic
product contracted 0.1 percent in the third quarter, confirming
the economy had slipped into its first recession in seven years.
But market watchers said participants were beginning to run
low on short-term incentives, limiting trading as a result.
"Macroeconomic factors are lessening in impact as the market
looks beyond for other incentives," said Takafumi Yamawaki, a
senior fixed-income strategist at BNP Paribas.
"The Nikkei may have to drop below a threshold like 8,000 --
or rise above 9,000 -- to stir the market into action," said
Yamawaki.
Tokyo's Nikkei stock average inched up 0.1 percent to 8,340
in early trade on Wednesday, with fears of a global recession
outweighing a positive impact from overnight gains on Wall
Street.
December 10-year JGB futures rose 0.06 point to 138.67.
The five-year yield was unchanged at 0.885 percent.
The benchmark 10-year yield dipped 0.5 basis point to 1.475
percent and the 20-year yield fell 1 basis point to 2.155
percent.
Analysts said caution toward Thursday's 900 billion yen
($9.28 billion) 20-year auction had eased slightly on
expectations that the new super-longs would see decent demand
from index players.
Such players follow certain indexes to allocate their bond
investments, and a popularly followed bond index is set to extend
significantly in duration.
U.S. Treasuries surged on Tuesday, boosted by a record
decline in producer prices that added to evidence that inflation
pressures are fast disappearing as energy prices slump.
(Editing by Chris Gallagher)
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