TOKYO: Japanese government bonds extended losses on Monday as broker hedging ahead of Tuesday's 10-year JGB auction weighed and after the Nikkei average reversed early losses following intervention by Japan to curb the yen, pushing JGB futures to their lowest since mid-August.
December 10-year JGB futures were down 0.10 point at 142.02, after marking their lowest since Aug. 12 at 141.98 when currency market intervention pushed up share prices.
JGB futures had opened higher, taking their cue from a rise in US Treasuries on Friday, but they sank into negative territory on broker hedging and position squaring ahead of Tuesday's 2.2 trillion yen ($29 billion) 10-year JGB auction.
JGB futures extend losses from Friday and moved closer to chart points seen as bearish signals. They touched their 100-day moving average at 141.98 and charts showed them approaching the lower end of the Ichimoku cloud at 141.96. A break below the 100-day moving average on the daily chart would be the first since April.
In cash bonds, superlongs such as 20- and 30-year bonds underperformed as their yields hit their highest since Sept. 8. The 20-year yield rose 1.5 basis points to 1.790 percent while the 30-year yield climbed 1 basis point to 1.985 percent, with position squaring before a 40-year JGB auction next Thursday likely weighing.
The benchmark 10-year yield inched up 0.5 basis point to 1.045 percent, their highest since Sept. 5. The yield is set to mark a monthly rise for the first time since February. The five-year yield rose to match a three-month high of 0.385 percent marked earlier this month.
JGBs showed limited reaction to Japan's currency intervention. Traders said the bond market is expected to remain subdued as it awaits key events such as the Federal Reserve's monetary policy meeting and US economic data, including jobs, due later this week to gauge the state of the world's largest economy.
A Reuters weekly survey showed a growing number of market players expect JGB yields to rise after a deal on measures to fight Europe's financial crisis reduced investors' appetite for safe-haven sovereign debt, but many respondents doubted yields would rise significantly. The median forecast of 57 market players for the 10-year JGB yield at the end of the week was 1.050 percent , compared to its close on Friday on 1.040 percent.
After the intervention, the dollar spiked more than 4 percent from a record low of 75.31 yen hit earlier in the day.
The Nikkei average was up 0.5 percent at the midday break after rising more than 1 percent.
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