TOKYO: Japanese government bonds edged down on Thursday, taking their cue from firmer domestic equities as well as losses in US Treasuries overnight after the US central bank signalled it was on track to raise interest rates next year.
Moves were small as investors positioned for this session's 20-year sale.
Japan's Ministry of Finance set the coupon on the new notes (issue number 151) at 1.2 percent, the lowest level since June 2003's 0.8 percent, down from 1.4 percent at November's offering in that zone.
Some JGB traders expect domestic cooperative funds and life insurers to buy the new 20's in Thursday's auction, but dealers might be more cautious than in the previous auction, as the Bank of Japan is not expected to buy any superlong JGBs on Friday as it holds a regular policy meeting.
The BoJ is widely expected to keep monetary settings unchanged and offer a slightly brighter view of the economy on tentative signs of recovery from recession, sources say.
On Wednesday, US Treasury yields rose after the US Federal Reserve said it would take a "patient" approach in deciding when to bump borrowing costs higher, guidance which it said is consistent with its previous statement that rates will be low "for a considerable time."
Japan's Nikkei stock average was up 2.6 percent, sapping the appeal of fixed-income assets.
The yields on the current 5-year, 10-year, and 20-year JGBs were all up 0.5 basis point from Wednesday at 0.05 percent, 0.360 percent, and 1.110 percent, respectively. The 30-year yield added 1 basis point to 1.365 percent.
Lead 10-year March JGB futures moved in a 147.49-147.61 range before finishing at midday down 0.04 point at 147.56.
Japan will issue fewer new JGB bonds for the current fiscal year than initially expected due to rising tax revenues, in a show of premier Shinzo Abe's resolve to prevent a further worsening of the country's finances, sources told Reuters.
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