TOKYO: Japanese government bonds inched lower on Wednesday with the appeal of safe-haven government debt undermined after upbeat US and European economic data boosted investor risk appetite.
The 10-year yield edged up 0.5 basis points to 0.985 percent, keeping below the psychologically key level of 1 percent.
The US Institute for Supply Management's index of national factory activity for December showed manufacturing activity grew at its fastest pace in six months in the final month of 2011. A rise in new orders suggested decent momentum in 2012, but some players were sceptical.
"Yesterday's US economic data was strong and increased risk appetite a bit, but even though the US economy seems to have been strong in December, I doubt that will continue," said Shogo Fujita, Chief Japan Bond Strategist at Bank of America Merrill Lynch.
JGB futures opened stronger, buoyed by the momentum of a higher close on the LIFFE, but faded in line with rising equities. March 10-year JGB futures inched down 0.03 point to 142.38.
The Nikkei rose to a three-week high on Wednesday, helped by the US data.
The JGB yield curve bear-steepened slightly, as superlong bonds such as 20 and 30 years were weighed down by uncertainty over whether the Japanese government will be able to overcome political opposition and implement a sales tax hike to alleviate the country's fiscal woes, market participants said.
Japanese Prime Minister Yoshihiko Noda wants to call a snap general election if parliament does not approve the bills needed for the sales tax increase, the Sankei newspaper reported on Tuesday.
The 30-year JGB yield climbed to 1.920 percent, 2 basis points higher after earlier falling to 1.895 percent, its lowest since Oct. 11.
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