TOKYO: Japanese government bonds were mostly flat on Wednesday as domestic market players refrained from active trading ahead of half-year book closing later in the week, though the curve mimicked its US counterpart by steepening slightly.
Ten-year cash JGB yields were unchanged at 1.000 percent , off a 10-month low of 0.965 percent hit last week.
Many investors were eager to take profits at yields below 1 percent, as historically falls below that level have never been sustainable and are always followed by selloffs, such as in August and October last year.
"Investors say they have never had a good time buying 10-year bonds below 1 percent," said Koji Ochiai, chief market economist at Mizuho Investors Securities.
On the other hand, short-covering by short-term players following declines in JGBs in the past few days has been enough to support the market.
Ten-year JGB futures were down 0.01 point at 142.47. Trading volume did not reach 10,000 lots in the morning. The average daily volume so far this year is around 22,000.
The 20-year JGB yield rose 1 basis points to 1.720 percent , causing the yield curve to steepen slightly, after the US curve steepened on Tuesday.
Long-end US bond yields rose on Tuesday on hopes for a bigger bailout fund in Europe.
In the yen interest rate swap market, a US bank seen carrying out a steepening play, a Japanese bank trader said.
At the short-end of the market, the overnight call rate was trading at around 0.07-0.08 percent. There was little sign of a funding strain for the financial half-year ending on Sept 30, with the overnight repo rate starting on Sept. 30 trading around 0.105 percent.
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