TOKYO: Japanese government bonds continued to tumble for a third session on Wednesday, with the benchmark yield rising to a 5-week high on hopes for positive European Central Bank steps toward solving that region's debt crisis, as well as concerns about domestic political wrangling.
The September 10-year JGB futures contract ended morning trade down 0.26 point at 143.81, while the December contract shed 0.42 point to 143.58.
The 10-year yield added 3.5 basis points to 0.810 percent, its highest level since July 5.
Global equities have rallied this week, sapping demand for safe-haven fixed-income assets, after the ECB indicated it could resume buying government bonds again to ease borrowing costs for debt-laden Spain and Italy. The rally continued on Wednesday, with Nikkei average climbing 1.6 percent.
Japanese political woes also weighed on bond market sentiment. Late on Tuesday, Japan's ruling Democrats delayed a final vote on their tax hike plan to deal with a no-confidence motion filed by smaller parties, keeping opposition pressure on Prime Minister Yoshihiko Noda to call an early election.
"The tax bill is expected to eventually pass, but with JGB yields already headed up, it's just another reason to sell," said a fixed-income fund manager at a Japanese asset management firm.
The Bank of Japan began its regular two-day policy meeting at which it is expected to take no new monetary steps but will stress that it remains ready to act if needed. It might also make an operational adjustment to its asset purchase programme.
The superlong sector outperformed, with yields on 20-year JGBs adding 4 basis points to 1.640 percent, their highest level since July 6.
Those on 30-year bonds also added 4 basis points to 1.850 percent, their highest since July 10.
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