* 10-yr yield slips to lowest level since November 2010
* 30-yr yield touches 8-week low before rebounding
* Investors expect 10-yr yield in range this week-survey
* Decent demand expected at Tuesday's 5-yr auction
By Lisa Twaronite
TOKYO, April 16 Japanese government bond prices
edged up on Monday, with the 10-year yield falling to a 17-month
low, as renewed fears about the European debt crisis and
expectations of future Bank of Japan easing steps added to the
appeal of fixed-income assets.
"The global risk-off tone is pressuring yields," said Credit
Suisse strategist Shinji Ebihara. "But it is difficult to expect
JGBs to move out of their current ranges in the short-term."
Reuters' weekly JGB market survey showed that JGB market
participants expect long-term yields to tread water in a narrow
range this week.
The yield on the latest 10-year notes edged
down 1 basis point to 0.930 percent, a level not seen since
Expectations of more easing steps from the Bank of Japan
continued to underpin JGBs. The BOJ held policy steady as
expected last week, and sources said the central bank could ease
by increasing government bond purchases under its 65 trillion
yen asset-buying and loan programme at its next meeting on April
"We are not going to see much movement ahead of the BOJ
meeting and with easing expected, no one is selling bonds.
Worries about Spain's debt situation are also keeping demand
firm," said a fixed income fund manager at a Japanese trust
The Spanish benchmark government bond yield soared on Friday
after data showed Spanish banks borrowed heavily from the
European Central Bank in March, reviving concerns over
struggling euro zone countries' ability to finance their debt.
The June 10-year JGB futures contract closed up
0.10 point at 142.69.
DECENT DEMAND EXPECTED AT 5-YEAR AUCTION
Investors looked ahead to Tuesday's auction of 2.5 trillion
yen of five-year JGBs by the finance ministry. The yield on the
5-year cash bond was down half a basis point to
0.285 percent, below the expected 0.3 percent coupon rate of the
"While the yield lacks catalysts for a reversal upswing for
the time being, we advise a buy-on-dips stance because an
auction conducted below 0.3 percent is not attractive," said RBS
strategists in a note to clients on Monday.
Nonetheless, some market participants expect decent demand
even at the current strong levels, from banks as well as brokers
covering their short positions.
The five-year tenor has outperformed since the BOJ's last
move to ease policy on Feb 14. The central bank purchases bonds
with up to two years left to maturity in its asset buying
programme, and many market participants expect that to be
eventually extended to five years.
The yield on 20-year JGBs was flat at 1.720
percent, after earlier retracing Friday's low of 1.705 percent,
which was its lowest level since Feb. 3.
The yield curve steepened on Monday as the 30-year JGB yield
added half a basis point to 1.900 percent, as
some investors took profits after it earlier fell as low as
1.890 percent, its lowest level since Feb. 20.