TOKYO: Japan's 30-year government bond yield ticked down ahead of an auction of similar maturity later in the day, outperforming other sectors, with the benchmark 10-year yield off its nine-year low.
The 30-year yield was down 0.5 basis point at 1.850 percent before the Ministry of Finance's auction of 700 billion yen ($8.79 billion) worth of the long-dated debt.
The yield on 10-year cash bond inched up 0.5 basis point to 0.795 percent, off its nine-year low of 0.790 percent hit on June 4, while 10-year futures slipped 1 tick to 144.08 after reaching their highest level since October 2010 in the previous session.
"We see no change in monetary policy in this week's BOJ meeting. The market is looking at some chances of monetary easing," said Akito Fukunaga, chief rates strategist at Royal Bank of Scotland in Tokyo.
"If we are correct, some expectations will be reversed after the BOJ meeting. I don't see the yields will go up sharply but perhaps some correction will happen," he said.
The spread between the 20- and 30-year bonds moved in to 230 basis points after trading at its widest at 235 basis points since October 2008 on Monday.
Yield on the 20-year debt was unchanged at 1.620 percent.
Morgan Stanley MUFG expected the spread between the two maturities debt to tighten. "We expect that flattening pressure will begin to dominate if yields rise sufficiently to attract life insurers and other level-conscious buyers, and believe that a 20s30s flattener is to be preferred over positions with short legs further back the curve by virtue of its lower carry cost," it said.
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