TOKYO: Japanese government bonds weakened at the longer end of the yield curve on Thursday, as investors made room to buy at a sale of 10-year notes.
The Ministry of Finance is offering 2.3 trillion yen ($29.2 billion) of 10-year notes with a coupon of 0.80 percent, the same coupon as last month's auction.
Ten-year JGB futures edged down on hedge selling ahead of the auction, ending the morning session down 0.03 point at 144.16..
The 10-year cash bond yield was flat at 0.775 percent, after earlier rising half a basis point to 0.780 percent. It remained well above a nine-year low of 0.720 percent hit last month.
Superlongs came under the most selling pressure, with the 20-year yield adding 1 basis point to 1.610 percent, while the yield on the 30-year note rose 1.5 basis points to 1.815 percent.
Investors are divided on the possible outcome of a European Central Bank meeting later on Thursday. A German newspaper reported that ECB President Mario Draghi will unveil a plan using both the ECB and the European Stability Mechanism to buy bonds from Spain or Italy.
"Uncertainty ahead of the ECB is likely to help demand at the auction," said a fixed-income fund manager at an asset management firm in Tokyo.
Bank of Japan board member Yoshihisa Morimoto warned on Thursday that Europe's deepening debt crisis could delay an expected pickup in external demand.
Weekly capital flow data released by the finance ministry earlier on Thursday showed that Japanese investors turned net sellers of foreign bonds in the week through July 28, unloading 8.9 billion yen, after six weeks of net buying.
Overnight, the US Federal Reserve took no new monetary steps at the conclusion of its two-day policy meeting but was more downbeat on the economy, keeping the door open for further bond buying, known as quantitative easing.
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