TOKYO: Japanese government bonds were slightly weaker on Monday though futures were off their lows, as the market's focus shifted from Greece's passage of an austerity package to the possibility that Bank of Japan might decide to expand its asset-buying program at its meeting this week.
The BOJ will conclude its two-day policy meeting on Tuesday, with some saying it may expand its 55 trillion yen ($715 billion) liquidity-boosting programme by increasing the 20 trillion yen asset-buying portion of it, mostly by buying more JGBs.
"If the Bank of Japan takes some sort of action, that would be positive for the short- and medium-term zones," said Satoshi Yamada, chief quantitative analyst at SMBC Nikko Securities.
"It's hard to see more adjustment in the 10- and 20-year tenors after they found support at yields of 1 percent and 1.75 percent (respectively)," he added.
The 10-year yield edged up half a basis point to 0.980 pct . The 20-year yield was flat at 1.740 pct , after earlier rising to 1.745 percent.
A Reuters weekly survey showed on Monday that JGB market sentiment improved as players expect a recent rally in share prices to run out of steam and on chances of more BOJ easing. Most respondents replied before news of the Greek vote.
The latest poll's JGB bull-bear diffusion index, calculated by subtracting the number of bearish market players from those that are bullish, turned positive for the first time in two weeks, rising to plus 6.
Futures opened slightly higher and rose as high as 142.38 but were last slightly down, though off their session lows. Ten-year JGB futures were down 0.02 point at 142.35, above the top of the daily Ichimoku cloud at 142.33, with further support seen at the cloud bottom at 142.18 and then at the Jan. 24 low of 142.10. They earlier sank as low as 142.28.
GDP data showed a bigger-than-expected decline, with Japan's economy shrinking 0.6 percent in October-December from the previous quarter on the global economic slowdown, Thai floods and a strong yen.
The decline was bigger than economists' median forecast for a 0.3 percent contraction, and followed a revised 1.7 percent expansion in July-September. It translated into an annualised contraction of 2.3 percent, against a 1.4 percent annualised decline expected by economists.
Greece's parliament approved a deeply unpopular austerity bill, even as protests and civil unrest spread across the country ahead of the vote, clearing the way for that country to secure another round of bailout funds needed to avoid default.
"Stocks showed a clear reaction to the Greek news and JGBs initially took their cue from that, but the impact faded," said Keiko Onogi, senior JGB strategist at Daiwa Securities.
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