TOKYO: Japanese government bonds were mostly down on Tuesday as weak demand at a 30-year auction undermined already shaky sentiment against the backdrop of rebounding equities, though bargain-hunting late in the session brought yields off their highs.
The Nikkei stock index ended up 2.5 percent as risk appetite recovered, lessening the appeal of safe-haven government debt.
Superlong JGBs underperformed, with the 20-year yield rising 1.5 basis points to 0.065 percent, but off a session high of 0.095 percent.
The 30-year yield rose 4 basis points to 0.135 percent , from 0.110 percent earlier in the session though down from 0.145 percent after the weak auction.
The Ministry of Finance offered 800 billion yen ($7.77 billion) of 30-year JGBs with a 0.30 percent coupon.
The notes sold at a lowest price of 104.45, below what many market participants had expected, and drew bids of 2.64 times the amount offered, falling from the previous sale's bid-to-cover ratio of 3.42 times.
The tail between the average and lowest accepted prices widened to 0.75, compared with that of last month's offering at 0.14, indicating weaker demand for the bonds.
The 10-year JGB yield was flat at minus 0.280 percent , down from a session high of minus 0.255 percent.
September 10-year futures ended up 0.09 point at 153.69, managing a gain after falling to a session low of 153.34, and moving back toward last week's record peak of 153.81.
Stocks got a lift after Prime Minister Shinzo Abe on Monday ordered a new round of fiscal stimulus spending expected to reach 10 trillion yen, after his party's decisive victory in weekend elections.
On Tuesday, Economy Minister Nobuteru Ishihara said that people still do not think Japan has fully escaped the risk of deflation, and that stimulus spending must ensure that Japan maintains enough speed to escape deflation.
The BOJ's quarterly survey on people's livelihood released earlier on Tuesday showed that Japanese households' inflation expectations weakened in the three months to June, keeping alive expectations of additional monetary stimulus.
Separate data from the central bank showed Japanese wholesale prices fell 4.2 percent in the year to June.
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