TOKYO: Japanese government bonds gained on Monday, with the 10-year yield falling to a 14-month low, on worries the mass downgrade of euro zone countries by Standard & Poor's could stymie Europe's efforts to contain its debt crisis.
The 10-year JGB yield fell 1.0 basis point to 0.935 percent, its lowest level since November 2010, with many market players expecting yields to continue to decline gradually.
"Investors are not overly long on JGBs now, as some of them reduced their holdings late last year," said a trader at a Japanese bank.
In a sign participants have few worries about a 700 billion yen 30-year bond auction on Tuesday, 30-year paper outperformed the overall market. Japan's finance ministry will reopen the 35th 30-year bonds maturing in September 2041 with a 2.0 percent coupon.
The 30-year bond yield declined 2.0 basis points to 1.900 percent, off a three-month low of 1.895 percent marked on Nov 4.
"Although some people say the (30-year) sector could be vulnerable to worries about fiscal risk, I think it is likely to be supported by the bullish tone of the overall market," said Satoshi Yamada, chief quantitative analyst at SMBC Nikko Securities.
The 20-year yield fell 1.5 basis points to 1.715 percent , its lowest in nearly eight weeks, while the yield on five-year notes dropped 0.5 basis point to 0.325 percent, also an eight-week trough.
Ten-year JGB futures rose 0.13 point to 142.79.
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