TOKYO: Japanese government bonds fell for a third session on Thursday and benchmark yields touched a three-week high, after stronger than-expected US housing starts data signaled an improved economic outlook.
The Nikkei share average rose 1.7 on Thursday, while US Treasuries wallowed at low levels after falling on Wednesday in the wake of data showing new US homebuilding surged in September to its fastest pace in more than four years.
"Treasuries fell overnight, and JGBs tracked this, creating a possible buying opportunity, but not many seem to be buying," said a fixed-income fund manager at a Japanese trust bank.
"There were some long positions in Treasuries, so they corrected, but there weren't such big longs in JGBs, so they have smaller room to move," he added.
The benchmark 10-year JGB yield added 2 basis points to 0.785 percent, its highest since Sept. 26.
The 10-year JGB futures contract ended morning trade down 0.28 point at 143.91, after falling as low as 143.90, its lowest since Sept. 25.
Futures fell below their 20-day moving average, now at 144.13, for the first time since Sept. 24. In a possibly bearish signal, their 5-day moving average, now at 144.18, fell below their 14-day moving average at 144.20.
The Ministry of Finance offered 1.2 trillion yen of reopened 20-year JGBs with a coupon of 1.7 percent, matching that of last month's sale.
Market participants say JGBs' fall over the past three trading days should lend support to the auction, with some buyers attracted to the cheaper levels.
"Another supporting factor is the lack of any more auctions of long-term or superlong JGBs until November," said strategists at Bank of America Merrill Lynch.
"The result of the EU summit scheduled for after the auction is a source of concern, but during this near-term yen weakening and share price strengthening, we like 10-year/20-year flatteners and 20-year asset swap longs," they said in a note to clients.
European Union leaders will hold a summit on Thursday and Friday, with investors to watch for any signals about the timing of a Spanish bailout.
The 20-year yield added 1.5 basis points to 1.690 percent and the 30-year yield rose 2 basis points to 1.950 percent.
The 5-year JGB continued to fare slightly better than longer maturities after a 5-year sale on Tuesday attracted record-high demand.
The yield on the 5-year note gained 1 basis point to 0.200 percent.
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