TOKYO: Japanese government bonds were higher on Tuesday on the back of continuing worries about the euro zone debt crisis.
Spanish 10-year bond yields jumped to 6.53 percent on Monday, their highest since November 2011, which pushed the yield premium over German Bunds to 515 basis points, its widest in the euro's 13-year history.
The benchmark 10-year JGB yield fell two basis points to 0.855 percent, within four basis points of its May 18 low of 0.815 percent, which was its lowest since July 2003.
The 10-year JGB futures contract ended morning trade up 0.22 point at 143.35.
The yield curve flattened slightly, with the 5-year yield shedding half a basis point to 0.220 percent, while the 30-year bond yield fell 2.5 basis points to 1.815 percent. * The yield on the 20-year bond fell two basis points to 1.665 percent, pushing the spread between the between 10-year and 20-year yields to 81 basis points.
That topped this year's high of 80.5 basis points on a last-trade basis, and brought it to its widest since September 2011.
"We still some room to have a steeper curve in the 5/10 years, and maintain our steepeners in the 2/5 years, and are waiting for a chance to add some 5/10 year flatteners," said a fixed-income fund manager at a European asset management firm in Tokyo.
"We maintain our 10/20 flatteners. I don't think the 10/20 moves quite a bit, so we have to hold the current position to gain our carry from the spread," he added.
The 2-year note was untraded. The finance ministry offered 2.7 trillion yen of those notes with a coupon of 0.1 percent, the seventh consecutive auction with that coupon.
The sale is expected to proceed smoothly because the Bank of Japan now purchases bonds with up to three years left to maturity, and is currently buying most of the new issuance of 2-year notes.
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