Japanese government bonds climbed and futures hit a three-month high on Friday as stocks dropped after bleak US jobs data dampened expectations about the pace of economic recovery, helping demand for government debt. Investors continued to pick up cash bonds across the board to make up for a slow start to their buying in the first quarter of the financial year from April to June, with investors such as life insurers adding longer-dated bonds to their portfolios.
The benchmark 10-year yield slipped to a three-month low, also underpinned by a smooth auction for the maturity on Thursday despite earlier worries about an increase in the size of the sale. The 20-year yield briefly dipped below 2 percent for the first time in two months. Analysts said the appetite of investors such as life insurers for 20-year bonds tends to fall away when the yield drops below 2 percent. September futures rose 0.24 point to 138.44 after touching 138.55, their highest since late March.
"After stocks declined in the wake of the US jobs figures, worries over the economic outlook prevailed," said Naomi Hasegawa, a senior fixed income strategist, at Mitsubishi UFJ Securities. The yield on benchmark 10-year bonds fell 3.5 basis points to 1.320 percent, the lowest in three months, flattening the yield curve slightly.
The two-year yield slipped 2 basis points to 0.255 percent after falling as far as 0.250 percent, its lowest since January 2006. The five-year yield ended down 1.5 basis points at 0.675 percent, after dipping to 0.660 percent, a level last seen in late January. A drop below that level would take it to its lowest in nearly four years. The 30-year yield fell 2 basis points to 2.165 percent.
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