TOKYO: Benchmark Japanese government bonds were steady in thin trade on Thursday, supported by the Bank of Japan's asset-buying operations.
The BoJ offered to buy 600 billion yen ($6.07 billion) in JGBs outright with residual maturities of more than 5 years and up to 10 years, and another 600 billion yen maturing in more than one year and up to 5 years.
The 10-year Japanese government bond yield edged down half a basis point to 0.585 percent.
The benchmark yield has clung to a narrow trading range of 0.55 to 0.65 percent since late last month, after initially gyrating in the wake of the BOJ's massive stimulus scheme unveiled on April 4.
"Lately, volatility has dropped, and it's hard to see bonds making big moves, at least ahead of this summer's election," said a fixed-income fund manager at a European asset management firm in Tokyo.
Prime Minister Shinzo Abe's approval rating remains high, and his Liberal Democratic Party and smaller coalition parties have a chance at winning a two-thirds majority in July's upper house election. They already hold two-thirds of the lower house.
The 10-year JGB futures contract inched up 0.06 point to 144.78 at the end of morning trade, after spending the session wedged in a narrow range between 144.75 and 144.85.
The 20-year bond slightly underperformed, its yield adding half a basis point to 1.505 percent, while the 30-year bond was untraded so far, after its yield closed at 1.635 percent on Wednesday.
The lack of JGB supply and low yields will slow the pace at which Japanese insurers raise their exposure to long-term JGBs to cut the duration gap between assets and liabilities, Fitch said in a report released on Thursday.
Fitch estimated this gap to be approximately five years, and said the sensitivity to interest rates which the gap produces makes this a major risk.
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