TOKYO: Japanese government bond prices were modestly higher on Thursday on the back of firmer US Treasuries, with the five-year yield slipping to a two-week low ahead of an auction of the same maturity later in the day.
The five-year yield eased 0.5 basis point to 0.255 percent, matching 3-1/2 month trough hit on Aug. 30.
The Ministry of Finance is to sell 2.7 trillion yen ($27 billion) of five-year bonds with a coupon rate of 0.30 percent.
"Short- to medium-term bonds probably look attractive relative to higher-risk long-term bonds due to the uncertainty surrounding QE exit strategy," Barclays Securities wrote in a note.
"Another support is the BOJ's downscaling of five to 10 years buying operations and shift in the direction of the five-year and shorter sector. In this context, we believe today's auction is also likely to go smoothly."
The 10-year yield dipped 1 basis point to 0.725 percent, while the 10-year futures rose 0.13 point to 143.69.
Traders said domestic real money accounts were seen largely sidelined in early morning trading.
Earlier, Japan's core machinery orders were unexpectedly flat in July, a weak spot in a run of strong recent data and a reminder that firms are still not confident enough about the economy's recovery to aggressively increase capital expenditure.
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