TOKYO: 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 from investors amid increasing uncertainty over whether the Japanese government will be able to overcome political opposition and implement a sales tax hike to alleviate the country'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.
A 300 billion yen ($3.89 billion) liquidity-enhancing sale is set for Friday , through which the Ministry of Finance will sell extra amounts of 20- and 30-year JGBs already in circulation. The MOF will also offer 2.2 trillion yen of 10-year JGBs on Jan. 12 and 700 billion yen of 30-year bonds on Jan. 17.
March 10-year JGB futures inched down 0.01 point to 142.38, keeping slightly below their daily Ichimoku cloud at 142.43, which had been capping futures since late November.
European shares and the euro are heavily undermined by deep-rooted concerns about a possible default by struggling countries such as Greece, expectations for credit downgrades of top-rated euro zone economies including France, and worries over whether highly indebted countries such as Italy and Spain can successfully refinance their maturing debt.
A solid auction of French government bonds failed to ease bearish sentiment as market players turned their eyes towards next week's debt sales by Spain and Italy, the two big economies seen as most at risk from the crisis that has already dragged down Greece, Ireland and Portugal.
France drew solid demand at its first debt auction of 2012 on Thursday, with yields rising only slightly despite fears for its AAA debt rating, raising 7.96 billion euros, at the top of its projected range.
The Nikkei share average was down 1 percent on Friday.
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