TOKYO Jan 27 Japanese government bond prices gained on Monday as investors fled risk assets after recent heavy selling in emerging market currencies, pushing the benchmark 10-year yield to an eight-week low.
The 10-year yield fell 2.0 basis points to 0.610 percent , its lowest level since Dec. 2 while the 20-year yield fell to as low as 1.445 percent, just shy of its Oct. 24 trough of 1.440 percent.
Concerns that the double-whammy of tighter U.S. monetary policy and an economic slowdown in China could destabilise some emerging economies, prompted investors to buy government debt of rich countries as a safe haven.
"While we stick to out long-term view that JGB yields will rise, we change our short-term trading ideas. In coming days, bonds will be supported and shares will be vulnerable as it will take a while for risk appetite to return," said Akito Fukunaga, chief rates strategist at RBS.
"I expect the 10-year yield to stabilise below 0.6 percent, near its low of 0.58 percent in November," Fukunaga added.
The market was supported by buying from pension funds to extend the average duration of their bond holdings ahead of the month-end, while market sentiment also benefitted after the 10-year futures broke above resistance from the Ichimoku cloud on Friday.
JGBs are expected to enjoy the tail wind from the global risk-averse mood in coming weeks as U.S. lawmakers are likely to fight over the debt ceiling, some market players said.
The Obama administration has warned that the government could run out of borrowing authority needed to help pay its bills as soon as late February.