Japanese government bonds (JGBs) slipped on Monday due to investor caution at the start of a busy week that includes two bond auctions, a Bank of Japan policy meeting and a slew of economic data A rebound in Tokyo stocks also pressured JGBs ahead of a 20-year bond sale on Tuesday, which kicks off an event-filled week that will culminate with data on Japanese consumer prices and industrial output on Friday.
"We're seeing a bit of profit-taking from last week's gains, but the market is basically on hold for the data at the end of the week," said Tetsuya Miura, bond strategist at Shinko Securities.
He added that the figures could help shape the near-term outlook for interest rates.
In the meantime, dealers were keeping a wary eye on Tokyo's Nikkei share average as it inched closer to 12,000, a level that some analysts say could spark selling in government debt.
The Nikkei rose 0.58 percent to close at 11,762.65, paring losses from the previous session as worries faded about the potential damage to big Japanese exporters after China revalued the yuan. The broader TOPIX put on 0.3 percent.
Both indices had hit their highest levels since early April on Thursday, putting pressure on JGB yields to rise further from the 22-month lows scored almost a month ago.
September 10-year futures slipped 0.19 point to 140.51. Benchmark 10-year yields rose two basis points to 1.250 percent but remained less than 10 basis points above 22-months lows touched in late June.
Dealers sold JGB futures as a hedge against the outcome of the Finance Ministry's 700 billion yen ($6.27 billion) auction of 20-year bonds on Tuesday.
Many market participants expect the coupon to be set at 2.0 percent, higher than 1.9 percent at last month's offer.
Strategists said a rise in yields in the super-long sector relative to 10-year yields suggested that investor demand would be solid for the 20-year issue.
The difference between 10- and 20-year yields has widened to 72 basis points, the biggest gap since October 2002.
Traders are also keeping an eye out for buying of longer-dated maturities before the month's end. The big slate of JGB sales in July, including 10-, 20- and 30-year issues, has caused a hefty extension of performance index benchmarks.
Thirty-year yields rose 1.5 basis points to 2.365 percent, while 20-year yields edged up 1.5 basis points to 1.965 percent.