JGBs supported after solid 10-year auction

TOKYO: Japanese government bond prices nudged up on Friday, with the 10-year yield a stone's throw from a one-year low hit in November, drawing support from strong demand at an auction in the maturity the day before.

"Yesterday's auction was decent even though the 10-year tenor was rather expensive on the yield curve. When you look at the results, it's hard to bet on a rise in yields," said a trader at a European brokerage.

The firmness in JGBs came even as Japanese and global share prices gained, though some market players said there was a risk that JGBs could be hit by unwinding of safe-haven buying if worries over Europe ease.

"Bonds from the U.S, Germany and Japan are priced well above fair levels due to the European debt crisis," said Chotaro Morita, chief strategist at Barclays.

If investors think the risk of extreme events happening in Europe has receded, that could lead to the unwinding of bids in these core bond markets, Morita said.

The 10-year cash bond yield fell 0.5 basis point to 0.950 percent, near a one-year low of 0.940 percent marked last November.

Yields on most other maturities also dipped, with the five-year yield falling 0.5 basis point to 0.330 percent .

The yield on 30-year bonds stood flat at 1.920 percent, however, ahead of an auction in the tenor on Tuesday.

Copyright Reuters, 2012