The Fed is expected to announce further monetary easing Wednesday at 1815 GMT, perhaps in the form of selling shorter-dated Treasuries and buying longer-dated debt in an effort to reduce longer-dated interest rates, also known as "Operation Twist".
Market players remained reluctant to make major changes in their positions during a three-day week, with Monday and Friday national holidays in Japan and ahead of half-year book closings on Sept. 30, traders and fund managers said.
Some market players say Operation Twist has already been factored into the JGB market, and if the Fed does not go beyond market expectations to help the economy, players will likely unwind positions, which could push long-dated debt yields higher.
"It really depends on how far US yields rise, but if the 10-year Treasury yield rises far above 2 percent there would be some impact on yen bond yields, which would likely be pushed higher," says Shinji Nomura, chief fixed-income strategist at SMBC Nikko Securities.
Meanwhile, charts kept reflecting bullish momentum. December 10-year JGB futures edged down 0.01 point to 142.72 , but stayed above key support at 142.56 from the kijun line on their daily Ichimoku chart on Wednesday.
Worries over global economic growth also kept supporting debt markets. The International Monetary Fund said on Tuesday that Europe and the United States could slip back into recession next year unless they quickly tackle economic problems that could infect the rest of the world.
The 10-year JGB yield inched up 0.5 basis point to 0.995 percent , remaining in middle of its 0.985-1.000 percent range of the last few weeks.
The 10- and 20-year yield spread shrank to 73.5 basis points, the tightest in seven month, as the 20-year yield declined 0.5 basis point to 1.730 percent .
Copyright Reuters, 2011