TOKYO: Japanese government bonds reversed early losses on Monday, as investors took advantage of a dip on the outcome of the weekend's Greek vote to buy ahead of quarterly redemptions this week.
The so-called 'safe-haven' appeal of fixed-income assets waned after Greece's cliffhanger election delivered a slim parliamentary majority to pro-bailout parties, a result seen as crucial to European leaders' efforts to hold the euro together.
Funds took the early weakness in JGBs as an opportunity to buy ahead of Wednesday's quarterly redemptions.
"The JGB market reaction today shows that JGBs are to some extent isolated from other major markets, and domestic supply/demand factors can affect them more than the impact of global events, or even domestic political events," said a fixed-income fund manager at a European asset management firm in Tokyo.
"I think the market has already moved on from the Greek vote, and has also shrugged off last week's Japanese political developments on the sales tax," he added.
On Friday, the ruling Democratic Party of Japan agreed with the opposition on a plan to double the sales tax to 10 percent by October 2015, a move seen as a first step towards restoring the country to fiscal health.
The 10-year JGB yield slipped 1 basis point to 0.840 percent, after rising to 0.860 percent in early trade.
The 10-year JGB futures contract for September ended morning trade up 0.08 point at 143.63 after earlier falling as low as 143.38.
The yield curve steepened as the superlong tenor underperformed, with the 20-year yield falling half a basis point to 1.660 percent after earlier advancing to 1.685 percent.
The 30-year yield added half a basis point to 1.875 percent, moving back towards a seven-week peak of 1.895 percent hit on Thursday but down from an earlier high of 1.885 percent on dip-buying.
A Thomson Reuters weekly JGB survey released on Monday showed sentiment deteriorated after two weeks of improvement, with most respondents expecting rates to remain steady at current levels.
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