TOKYO: Japan's government bond prices rose on Monday, regaining some of last week's lost ground, which saw the 10-year yield logging its biggest weekly rise in more than eight months, and after Japan's economy grew half the pace than expected in April-June.
Japan's economy expanded just 0.3 percent in April-June, below a median estimate of a 0.6 percent rise in a Reuters poll, fuelling concerns growth will continue to flag as a rebound in consumer spending starts to lose momentum and Europe's debt crisis weigh on global demand.
The 10-year yield dipped 1 basis point to 0.785 percent after rising 6.5 basis points last week to post its biggest weekly yield rise since November.
The content of the GDP was weaker than expected and coupled with the slowdown in China and the rest of the global economy, this confirms the Japanese economy will be slowing down in the second half of the year," said Tadashi Matsukawa, head of Japan fixed income at Pinebridge Investments.
"The JGB market had been weak, so this might give some excuse for investors to put money into play again in the JGB market," he said, referring to last week's sell-off because of the political wrangling over the passage of a consumption tax hike.
On Friday, the plan to double the sales tax cleared the final hurdle in a parliamentary vote after Prime Minister Yoshihiko Noda promised to bring forward an election likely to end his party's three-year rule.
Ten-year JGB futures rose 14 ticks to 144.02, breaking above their five-day moving average at 143.95. They dropped 63 ticks last week, their worst weekly performance since March.
"The JGB market tends to weaken from late August to September due to the fiscal half year ... due to realisation of profits by banks. It might have happened last week due to the consumption tax bill," Matsukawa said. "We will continue to see selling by the banks when the market goes higher."
He added yields on benchmark 10-year bonds were likely to be boxed in between 0.700 and 0.800 percent as many banks were already underweight JGBs and likely to buy on dips.
Yields on 20-year debt slipped 1.5 basis points to 1.605 percent, while those on 30-year bonds eased 1 basis point to 1.825 percent.
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