TOKYO, March 29 Japanese government bond prices dipped on Thursday, reversing earlier gains, as Japanese banks took profits in the medium-term sector, with trade erratic just before the end of the Japanese financial year later this week.
* The June JGB futures contract fell 0.09 points to 141.86 while the yield on current 10-year cash bonds stood flat at 1.000 percent after a brief foray below the 1 percent mark.
* Many market players were expecting profit-taking to set in if the 10-year yield falls below the 1 percent mark, a level seen as a major psychological barrier. It is also a former major yield resistance level.
* The 10-year yield stayed below 1 percent for about three months until mid-March but recent strength in Japanese shares led many market players to think any fall in the 10-year yield below 1 percent was likely to be unsustainable.
* The Nikkei average fell 0.9 percent on Thursday but still held near one-year highs and above the 10,000 mark, a level few market players would have expected it to reach just over a few weeks ago.
* "Given the strong performance of risk assets, it will be hard to buy bonds further from here," said Le Ngoc Nhan, fixed income strategist at Morgan Stanley.
* "Bond yields are likely to edge up for now although we don't expect a sharp rise given the risk of slowdown in the global economy later this year," Nhan said.
* The five-year yield rose 0.5 basis points to 0.325 percent with Japanese banks said to be taking profits in this maturity.
* The two-year bond yield also rose to as much to 0.115 percent, the highest since the Bank of Japan's easing in mid-February, as the market looked for concession ahead of a 2.7 trillion yen two-year JGB auction later in the day.
* Trade flows were limited with many Japanese players not wanting to change their books ahead of the end of the financial year on March 31.