TOKYO: The 10-year yield on benchmark Japanese government bonds hit a nine-year low on Monday as concerns that Spain may need full-blown bailout boosted the appeal of government debt -- a development that also saw the yield on 10-year Treasuries hit a record low.
The 10-year JGB yield slipped 1 basis point to 0.730 percent, its lowest since June 2003, while 10-year bond futures rose 16 ticks to 144.62, their highest level in nine years.
The yield on benchmark 10-year Treasuries fell to a record low of 1.4365 percent in Asian trade. Tokyo's Nikkei share average dropped 1.3 percent,
"Domestic investors have room to purchase more JGBs," said Chotaro Morita, chief rates strategist at Barclays Securities Japan, adding that many regional banks and life insurers were behind in their purchase of JGBs as they had hoped that yields could go higher.
Instead JGB yields have been trending lower on concerns over the euro zone debt crisis and the slowdown in the United States and China.
"If the 20-year auction is smoothly digested, or there are some other environment factors related to overseas market, then the 10-year yield might be pushed further downward," Morita said.
Japan's Ministry of Finance is to sell 1.2 trillion yen ($15.3 billion) worth of 20-year bonds on Thursday.
Yields on 20-year bonds eased 1 basis point to 1.530 percent, while that on five-year debt inched down 0.5 basis point to 0.175 percent.
The spread between 10- and 5-year bonds narrowed to 55.5 basis points, its tightest since March 2009.
The Spanish region of Valencia said it would apply to Madrid for financial help, spooking markets and complicating central government efforts to stave off a full-fledged bailout.
And over the weekend, tiny Murcia was on course to be the second Spanish region to request help from Madrid, as media reported half a dozen local authorities were ready to follow the footsteps of Valencia.
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