TOKYO: Japanese government bonds mostly edged lower on Tuesday as stock market gains lessened the appeal of fixed income assets, though they remained supported by Bank of Japan buying and hopes for further stimulus.
The 10-year JGB yield added half a basis point to minus 0.230 percent, and September 10-year futures managed to eke out a 0.02 point gain to 153.12.
The Nikkei stock index ended up 1.4 percent, as markets reopened after a public holiday on Monday and responded to a weaker yen.
The BOJ offered to buy a total of 455 billion yen ($4.30 billion) of JGBs under its asset purchase programme, including 430 billion yen of 5- to 10-year JGBs and 25 billion yen of 10-year inflation-linked JGBs.
Further underpinning JGBs, speculation is growing among investors and strategists that the BOJ will take further stimulus steps at its July 28-29 meeting.
A majority of economists polled by Reuters said they expect the BOJ to ease policy later this month, mustering a combination of measures to spark inflation.
Japanese policymakers won't go as far as funding government spending through direct debt monetisation - so-called "helicopter money" - but might pursue a mix of aggressive fiscal and monetary expansion to battle deflation, according to sources familiar with the matter.
"I think most people in the JGB market think that although we understand the excitement FX and stock market, in reality, 'helicopter money' or perpetual bonds to be underwritten by the BOJ are still unrealistic," said Naomi Muguruma, senior fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities.
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