TOKYO: Most Japanese government bond prices edged down on Tuesday on expectations of prolonged monetary easing in the United States and measures to bolster the euro zone's rescue funds.
Benchmark June 10-year JGB futures dipped 0.07 point to 141.74, slipping from a near-two-week high of 141.81 hit on Monday. The 20-year cash bond yield rose 1.0 basis point to 1.775 percent.
Analysts said the market took cues from a strong rise in Japanese shares as well as a dip in long-end US bonds. Japan's Nikkei average hit its highest level in more than eight months on Tuesday after Federal Reserve Chairman Ben Bernanke signaled supportive policy is likely to continue.
Germany also indicated for the first time its willingness to increase the resources available for tackling the euro zone debt crisis, raising investors' risk appetite and undercutting the allure of bonds.
While JGBs were softer overall, the current five- and 10-year bonds bucked the trend as continued tightness in bond lending, or repo markets, made it difficult to sell these two issues short.
The current 10-year yield stood flat at 1.015 percent , while the on-the-run five-year bond yield dipped 0.5 basis point to 0.325 percent.
Some investors who are normally willing to lend bonds to brokers typically refrain from doing so near the financial year-end for regulatory reasons, often causing a short-squeeze in the lending market.
Apart from the bond lending market, there are limited signs of strain in the money market ahead of the end of the Japanese fiscal year on March 31.
The overnight call rate stood little changed at 0.06-0.07 percent, firmly within the Bank of Japan's policy target of 0-0.10 percent, with many banks awash with cash after the redemption of government bills and other government payments to the private sector on Monday.
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