TOKYO: Japanese government bonds rose on Thursday, after a German bond sale fuelled concerns about the euro zone debt crisis but gains were capped with market players saying losses in other assets such as stocks could prompt investors to cash in their positions.
Germany suffered one of its least successful debt auctions for new 10-year debt since the euro was launched in 1999, sparking fears the debt crisis was beginning to threaten the country on rising expectations it will have to bail out Europe's weaker nations.
Shogo Fujita, chief Japan bond strategist at Bank of America Merrill Lynch, said investors were generally still bullish on US, Japan and German bonds but falls in their yield levels may have made these bonds unattractive to some investors.
"It may be that some investors do not want to hold JGBs at current yield levels," he said.
Some investors may have to boost their cash positions by taking profits on their bond portfolios to prepare for more decline in stocks, he added.
In cash JGBs, the 10-year yield was down 0.5 basis point at 0.960 percent, near a one-year low of 0.940 percent marked last week. The five-year yield edged down 0.5 basis point to 0.310 percent.
Superlongs were likely being supported by month-end purchases by index-following players, market participants said. The 30-year yield declined 1 basis point to 1.905 percent, matching a one-month low hit this month. The 20-year yield inched down 0.5 basis point at 1.715 percent.
The long end of yield curve bull-flattened sharply as the 20-/30-year spread declined to 19 basis points on Thursday, from a three-year high at 22.5 basis points struck this month.
December 10-year JGB futures inched up 0.01 point to 142.97, but were below a one-year high of 143.14 marked on previous week.
US Treasury debt prices rose on Wednesday, pushing benchmark yields to the lowest in seven weeks.
The Nikkei average fell more than 1 percent to its lowest level since April 2009 on Thursday as mounting European debt concerns push overseas equities markets lower.
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