Japanese government bond prices were supported on Friday after weak manufacturing data from China and Europe rekindled global growth concerns, though most Japanese players stayed on the sidelines ahead of the closing of their books. In quiet trade, futures and the cheapest-to-deliver seven-year zone slightly outperformed the overall market after liquid futures took the brunt of heavy selling earlier this month.
Ten-year JGB futures rose 0.06 points to 141.61, extending their recovery from an eight-month low of 140.99 last week, with a chart gap at 141.76-141.90 created last week seen as an immediate target. Trading volume in the futures was 19,250 contracts, about 30 percent average daily volumes of around 27,000 so far this year as most domestic players were unwilling to trade ahead of their financial year-end on March 31.
The yield on cash 10-year JGBs stood flat at 1.025 percent, while the 20-year bond fell 0.5 basis points to 1.770 percent. Although the 10-year yield has slipped back from a 3 1/2 month high of 1.060 percent last week, traders were reluctant to bid further after cash 10-year JGBs met sizeable offers from investors near the yield of one percent on Thursday.
"Last week's rout hurt many investors. Some of them had nothing to do but pray (for an end to the sell-off.) I suspect there could be more loss-cut selling," said Akihiko Inoue, chief bond strategist at Mizuho Investors Securities. JGBs slumped last week, posting their biggest two-day fall since October 2008 at one point, on signs of recovery in the US economy and a sharp fall in the yen after the Bank of Japan's easing last month.
Massive selling by foreign players contributed to last week's rout, with data from Japan's Ministry of Finance on Friday showing foreign investors dumped 1.067 trillion yen of Japanese bonds last week, their biggest net selling since late September, 2008.
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