TOKYO: Yields on benchmark 10-year Japanese government bonds held at nine-year lows hit in the previous session, with analysts saying the deepening euro zone crisis was likely to cap yields in the near-term.
The yields on both 20- and 30-year bonds edged up 0.5 basis point, to 1.520 and 1.730 percent. They are still down 14.5 and 15 basis points, respectively, so far this month.
The 10-year yield was unchanged at 0.720 percent after ticking up 0.5 basis point earlier in the morning session, while 10-year JGB futures pulled back slightly from a nine-year high, down 1 tick to 144.62.
Concerns over the euro zone sovereign debt crisis and sluggish growth in China and the United States have lifted the appeal of US Treasuries, German Bunds and JGBs. The 10-year JGB yield has fallen 11 basis points so far this month after dropping 15.5 basis points in April-June.
"I don't expect the yield to go below 0.70 percent but it depends on the European issue," said a fixed-income fund manager at a Japanese asset management firm in Tokyo.
"The situation will continue for a while, with low volatility and low yield. It's attractive to take carry and the attractive part of the curve is close to the 10-year sector," the fund manager said.
He said big Japanese banks, which are flushed with cash, would likely buy the 10-year tenors for carry rather than going after the superlong sectors or anything below 5-year maturity, which will keep the 10-year bonds supported. Life insurers and pension funds are the main buyers of the superlong debt.
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