Longer-dated Japanese government bonds underperformed on Friday ahead of a busy auction schedule, while futures steadied as investors hugged the sidelines ahead of US jobs data and a three-day holiday in Japan. Superlongs were also weighed down by minor profit-taking by investors amid increasing uncertainty over whether the government will be able to overcome political opposition and implement a sales tax hike to alleviate Japan's fiscal woes, dealers said.
The 20-year cash bond yield was up 0.5 basis point at 1.755 percent and the 30-year yield climbed 1 basis point to 1.925 percent. The 10-year yield inched down 0.5 basis point to 0.980 percent, having kept below 1 percent since mid-December. The five-year yield was flat at 0.335 percent, staying in the middle of its 0.3-0.4 percent range of the last six months.
"Today there are very small market moves as investors are waiting until next week to start this year's trading, after Japan's three-day weekend. There is a chance of a correction but as long as stocks are weak there won't be a sell-off," said a trader at a Japanese bank. "There isn't any good news from Europe, which will keep yields low." Investors are also looking ahead to US payrolls data on Friday, with the median of forecasts from analysts polled by Reuters guessing employers added 150,000 jobs in December, up from 120,000 new jobs in November.
Friday's 300 billion yen ($3.89 billion) liquidity-enhancing sale, through which the Ministry of Finance was selling extra amounts of 20- and 30-year JGBs already in circulation, drew decent demand from investors and was helped by brokers' short- covering.
But market participants expect long-dated paper will keep facing pressure ahead of a busy supply schedule this month. The MOF will offer 2.2 trillion yen of 10-year JGBs on January 12, 700 billion yen of 30-year bonds on January 17 and 1.1 trillion yen of 20-year notes on January 26.
March 10-year JGB futures were up 0.04 point at 142.43, having risen as high as 142.46, slightly above their daily Ichimoku cloud that had been capping futures since late November, as share prices were pressure by rumours including talk of an incident at North Korea's nuclear facilities and that a cut in France's credit rating was imminent.