TOKYO: Japanese government bond prices mostly edged lower on Wednesday, pressured by an overnight fall in US Treasuries and a lukewarm response at the previous session's 10-year auction.
US Treasuries marked their largest selloff in three weeks after minutes of the Federal Reserve's March policy meeting suggested policymakers are less likely to take more monetary stimulus steps as the US economy continues to improve.
"There are still expectations that the Bank of Japan will ease further, which has been supporting JGBs, particularly at the short end of the yield curve, but fading expectations of more US easing ahead weighed on overall sentiment today," said a fixed-income fund manager at a Japanese trust bank.
Some strategists say the BOJ could take more easing steps as soon as this month to help it meet its inflation goal of 1 percent that was set at its February meeting.
The short end of the JGB yield curve pared losses and the longer end erased them as stocks skidded. The benchmark Nikkei fell 0.9 percent to the lowest level since mid-March.
The yield on 10-year notes rose to 1.035 percent , up one basis point on the day, but down from a high of 1.050 percent touched early in the session. The March 15 high of 1.060 percent is seen as major support.
The Ministry of Finance's 10-year bond auction on Tuesday attracted strong bids above market expectations, but buying appeared mostly to have come from brokers covering short positions, so the auction provided little support.
Longer-dated bonds outperformed as stocks sank, with the 30-year bond yield edging down half a basis point to 1.975 percent. Bargain-hunters emerged when it rose to 1.985 percent, the highest level since mid-March.
On the shorter end, the five-year bond yield was flat at 0.345 percent and the two-year yield was flat at 0.115 percent.
The June 10-year JGB futures contract fell 0.14 point to 141.45, paring losses from a low of 141.28.
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