TOKYO: Japan's government bond yields edged higher on Monday after stronger-than-expected US jobs data eased concerns over slowing growth in the world's largest economy, while growing optimism for European action boosted risk appetite.
However, the sell-off in JGBs was relatively tame, despite a 1.9 percent rise in Tokyo's Nikkei average, as analysts said investors needed to see more evidence of stronger global growth and many of them were behind in their purchase of JGBs as the first half of Japan's fiscal year approaches, prompting them to buy on dips.
The 10-year yield added 1 basis point to 0.740 percent, while 10-year JGB futures fell 9 ticks to 144.42, holding above their 20-day moving average at 144.33.
"June's nonfarm payroll was revised down, so the overall pace of employment increase in the US is still insufficient for a sustainable economic recovery," said Naomi Muguruma, senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities.
US employers hired the most workers in five months in July, but an increase in the jobless rate to 8.3 percent kept prospects of further monetary stimulus from the Federal Reserve on the table.
"I think JGB market participants think that there is a good chance for the Fed to decide additional easing at its next meeting in September," Muguruma said.
"Also there is some speculation for the BOJ meeting this week ... The consensus is that the BOJ is expected to stay pat this time but many market participants think it is just a matter of time before the BOJ either expands its buying of JGBs or removes the minimum bid yields for its purchase operations."
The Bank of Japan, which is due to conclude its two-day meeting on Thursday, is expected to keep monetary policy steady but may escalate its warnings over slowing global demand and renewed gains in the yen, signalling its readiness to ease again if the economy's recovery comes under threat.
Yields on both 20- and 30-year bonds ticked up 1 basis point, to 1.575 and 1.790 percent, respectively.
Austrian Chancellor Werner Faymann thinks German Chancellor Angela Merkel will drop opposition to measures such as giving the euro zone's permanent bailout fund a banking licence if that is what is needed to save the euro, he told a newspaper.
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