TOKYO: Japanese government bond futures were mostly flat on Friday and were likely to stick to a narrow range in relatively thin trade as investors wait for more signals from leaders working out details of a plan to contain the euro zone debt crisis.
France and Germany said in a joint statement on Thursday that the leaders will discuss in detail a comprehensive solution to the euro zone's financial problems at a summit on Sunday but no decisions will be adopted before a second meeting to be held by Wednesday at the latest.
"Market participants are keeping to a wait-and-see stance as they don't want to take risks either through long or short positions," said a trader at a US brokerage.
December 10-year JGB futures inched down 0.01 point to 142.32, off a 1-1/2 month low of 142.04 hit earlier this week and keeping above their 75-day moving average, which has offered support.
The 10-year JGB yield was also flat at 1.005 percent, off a 1-1/2 month high of 1.030 percent marked on Tuesday. The five-year yield edged down 0.5 basis point to 0.365 percent, gradually moving away from a three-month peak of 0.385 percent reached on Wednesday.
Twenty-year bonds underperformed other maturities with their yield climbing 1.5 basis points to 1.770 percent, matching a one-month high hit on Thursday. The trader from at a US brokerage said there were no significant flows but that some participants who took long positions after Thursday's auction of the maturity were likely trimming their positions.
JGB yields could climb if Europe's debt woes begin to be solved, but many participants expect yields to stay range-bound near recent lows. "The 10-year yield is unlikely to break (its recent low of) 0.965 percent in the near-term because the euro zone debt crisis will not be as bad as the Lehman shock, but JGBs will be supported by a weakening outlook for the global economy," said Takeo Okuhara, a fund manager at Daiwa SB Investments.
JGBs are also expected to be underpinned by easing fears towards supply increases as the Japanese government will only boost two- and five-year bond sales by 100 billion yen each per month from December to finance a budget for rebuilding after a massive earthquake, and the size of additional sales is limited compared to initial expectations.
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