TOKYO: Japanese government bond prices edged up on Monday, supported by softer-than-expected US growth data and the Fed's pledge to keep rates near zero until 2014, though wariness about an upcoming debt auction kept buying in check.
The 10-year JGB yield dipped 0.5 basis point to 0.960 percent, inching closer to a 14-month low of 0.935 percent hit two weeks ago.
JGBs tracked gains in US Treasuries on Friday, when data showed US economy grew an annualised 2.8 percent, falling short of a consensus forecast of 3.0 percent and with two-thirds of the growth coming from a build-up in business inventories.
"When you strip out the effect of the inventory build-up, the economy grew less that one percent, and that is worth noting as the those who have a positive outlook for the global economy are basing their outlooks on the US economy," said Takafumi Yamawaki, chief strategist at JPMorgan.
The data added to the market's bullish mood after the US Federal Reserve's vow to keep interest rates very low for about three years last week spurred expectations that the Bank of Japan may also need to follow suit -- with or without such an explicit commitment.
But market players also said buyers were cautious ahead of the 2.2 trillion yen 10-year JGB auction on Thursday, as a fall in the current 10-year bond yields below 0.95 percent could bring down the coupon rate on the new issue to 0.9 percent, which would be the lowest in 15 months.
"Wariness about the auction is the biggest reason people hesitate to hit the 0.95 percent level now," said Akihiko Inoue, chief strategist at Mizuho Investors Securities.
Ten-year JGB futures rose 0.05 point to 142.66, though a test of January 16 high of 142.86 is seen unlikely at least before the auction.
With just less than two days left before the month-end, futures look likely to post their second narrowest monthly trading range on record this January.
The futures have traded in a 0.76 point range between 142.10-142.86, which would be the second tightest range after a range of just 0.64 points in May 1991.
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