TOKYO: Japanese 10-year government bonds skidded on Tuesday, particularly at the long end of the curve, as investors sold bonds ahead of a 40-year sale, and as risk appetite perked up on hopes that Europe will take more steps to address its debt crisis.
The September 10-year JGB futures contract ended morning trade down 0.19 points to 144.25, back below their 14-day moving average after closing above it for two sessions.
Futures trading was halted for much of the morning due to an apparent system problem at the Tokyo Stock Exchange, which said it was investigating the issue.
The Ministry of Finance is offering 400 billion yen ($5.11 billion) worth of 40-year bonds on Tuesday with a 2.0 percent coupon, the same as the coupon at the previous quarterly sale in May. Superlong bonds have underperformed the shorter end, though some strategists said other tenors offer more value.
"For those placing importance on yield curve balance, we think the 30-year sector is the more attractive investment within the over 10-year sectors, and see no particular reason to make the 40-year sector the center of gravity," said strategists at Credit Suisse in Tokyo.
The 10-year yield added 2.5 basis points to 0.760 percent after trading as high as 0.765 percent, moving away from a nine-year low of 0.720 percent hit last month.
Spain and Italy's borrowing costs fell overnight but remained around levels considered unsustainable, with Spain's 10-year debt trading around a 7 percent yield.
Still, Asian equities rose, with Tokyo's Nikkei average climbing 0.6 percent.
The Bank of Japan will begin a regular two-day policy meeting on Wednesday, at which it is expected to keep monetary policy steady but emphasise it remains ready to take stimulus steps if needed. It might make some technical tweaks to its asset purchase programme, and could scrap the minimum bidding yield for JGB purchases.
Such expectations have underpinned the shorter end of the yield curve, leading to steepening. At its last policy meeting in July, the bank abandoned the minimum 0.1 percent bidding yield to buy discount bills and commercial paper under the asset purchase programme.
Yields on 20-year JGBs rose 2 basis points to 1.585 percent after trading as high as 1.585 percent, while those on 30-year bonds added 3 basis points to 1.810 percent.
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