TOKYO: Japan's government bond prices were mostly weaker on Thursday, with the yield on superlong sectors off a five-week low, as the market awaited the outcome of a Bank of Japan policy meeting.
The 10-year bond yield was unchanged at 0.780 percent after reaching a nine-year trough on Wednesday, while 10-year JGB futures were also flat at 144.16, a 21-month high.
Wednesday's gain was led by the superlong tenors after robust demand in an auction of 700 billion yen ($8.79 billion)worth 30-year bonds on Tuesday.
The 30-year yield added 1 basis point to 1.815 percent, off a five-week low touched on Wednesday, while that on the 20-year bond put on 1.5 basis points to 1.610 percent, also backing away from a low since early June.
"The over 10-year curve had steepened too much before last week. This week we saw some kind of reaction to the excessive steepening," said Chotaro Morita, chief rates strategist at Barclays Securities Japan.
"But basically in this market, the main investors are life insurance companies. They are targetting absolute yield level, which is expected to be higher than current yield level. Demand for this sector is limited. I don't think such a reaction will continue for a long time."
The BoJ is expected to hold off on easing, as it is convinced that the country's economy is headed for a moderate recovery as strength in domestic demand alleviates the pain from slowing global growth.
Morita of Barclays Securities said that if the BoJ leaves monetary policy unchanged, the short-end of the curve may steepen because some investors had priced in some sort of monetary easing.
But he said any steepening would be small because market players would continue to expect some kind of easing after the next meeting.
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