Japanese government bonds were firm in subdued trade on Friday, with the 10-year yield below 1 percent as market players were cautious about shifting positions amid uncertainty over developments in Greece and ahead of US jobs data. Greece's abrupt call for a referendum on its bailout package, just days after a deal was struck to save the debt-stricken country from defaulting, sparked panic in global financial markets earlier this week.
Greek Prime Minister George Papandreou faces a knife-edge confidence vote on Friday after his plan for the referendum backfired disastrously. Risk assets such as stocks steadied on Friday on hopes Greece will abandon the proposed referendum, but market participants remained cautious ahead of the confidence vote in the Greek parliament.
"Even if market sentiment becomes somewhat 'risk-on', 10-year JGB yields are unlikely to rise as high as 1.5 percent because the situation in Europe will hurt the global economy over the long term, including the Japanese economy," said Jun Fukashiro, chief fund manager at Toyota Asset Management. The 10-year JGB yield was down 0.5 basis point at 0.985 percent, approaching a 10-month low of 0.965 percent hit in late September and early October. The five-year yield declined 1 basis point to 0.340 percent, its lowest in a month.
But market players were also cautious about chasing yields lower, keeping JGB prices in a rangebound. Lead 10-year JGB futures rose 0.09 point to 142.67, having marked their highest in a month at 142.72 despite a rise in Tokyo stocks and Thursday's fall in US bond prices. The US labour market is expected to show some underlying strength in October, with non-farm employment seen increasing 95,000 and wages gaining for a second month, a further boost for an economy that had been flirting with recession only months ago.