TOKYO: Japanese government bonds pared losses on Thursday after a solid 10-year auction, but remained pressured by weaker sentiment toward debt after the US Federal Reserve signalled no imminent reduction to its bond-buying stimulus.
The Fed offered no sign after its latest meeting that it was ready to begin paring the $85 billion in assets it buys each month to stimulate the US economy.
"The auction was in line with expectations, but nonetheless, the market did not move so much," said Naomi Muguruma, senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities.
"I think everyone is waiting for tomorrow's big data in the US," she said. "If the data is extremely strong, I think the market will start to price in an early tapering, and that would push up US Treasury yields and maybe put some upward pressure on JGBs yields as well."
The US payrolls report on Friday is expected to show an increase of 184,000 with a chance of an upside surprise after the ADP survey showed private jobs rose 200,000 in July.
Muguruma added that she expected the benchmark yield to stick to a range of 0.75 percent to 0.85 percent in August.
The benchmark 10-year yield rose half a basis point to 0.795 percent, off an earlier high of 0.800 percent and edging back toward 0.770 percent touched last week, which was its lowest since May 14.
The 10-year JGB futures contract ended down 0.01 point at 143.61, taking back ground after sinking as low as 143.41. Volume of 23,576 was still relatively low, but was the highest since July 11 amid thin summer market conditions.
Prices for US Treasuries rose on Wednesday after the Fed's statement, reversing early losses and pushing the yield on the benchmark 10-year Treasury note down to around 2.58 percent.
As yields on Treasuries have come off recent highs, Japanese investors' net buying of overseas debt has slowed.
Domestic buyers took in a net 233.2 billion yen ($2.37 billion) of foreign bonds in the week through July 27, the fourth straight week of net purchases, but net buying slumped from 601.4 billion yen in the previous week, capital flows data compiled by the Ministry of Finance showed.
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