TOKYO: Japanese government bond prices were little changed on Monday as the market struggled to find immediate cues after US financial markets were closed on Friday for Independence Day.
The benchmark 10-year JGB yield inched up half a basis point to 0.565 percent.
September 10-year JGB futures crawled 0.02 point higher to 145.58. Focus for the range-bound JGB market was on Tuesday's 400 billion yen ($3.92 billion) 10-year inflation-linked JGBs.
Participants expect the inflation-linked JGBs, known as "linkers," to attract decent demand from investors like pension funds, but not necessarily due to the fact that Japan is showing some signs of overcoming years of deflation.
"The linkers look attractive because compared to actual inflation expectations, their prices still remain relatively low," said Katsutoshi Inadome, fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.
It may take another three to six months before inflation expectations actually play a part in generating demand for the linkers, although the outlook is murky as the market does not fully share the Bank of Japan's view that prices will start rising again after a lull, Inadome said. The BOJ expects the rise in core consumer prices, which in May climbed 3.4 percent from a year earlier, to slow over the next few months before resuming its ascent towards 2015.
Debt-reliant Japan reintroduced the linkers last October for the first time in years with Prime Minister Shinzo Abe vowing to revitalise the economy by ending years of deflation.
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