Japanese government bond futures inched down on Friday as investors unwound long positions in the wake of weaker US Treasuries and Tokyo's Nikkei stock average rising back towards a two-month high. Foreign investors such as hedge funds also continued unwinding long positions in futures after the prospect of further monetary policy easing by the Bank of Japan was dented midweek, market players said.
JGB futures hit a four-month low this week after the BOJ policy board decided to increase the size of a special funding operation on Wednesday but on a split vote, suggesting the central bank would be unlikely to continue loosening in the months ahead. A series of data hinting that the country's economy will continue improving gradually has also hurt JGBs.
Though the market remained on the back foot, selling may have mostly petered out for the time being, analysts said. "The market appears to have absorbed most of the selling pressure generated by this week's events," said Atsushi Ito, a fixed-income strategist at Morgan Stanley.
"Investors are now turning their attention to tweaking their positions ahead of the fiscal year end (on March 31), keeping movements limited." June 10-year JGB futures slipped 0.07 point at 138.48. The lead futures contract fell to a trough of 138.39 on Thursday, its lowest since November 12.
The 30-year yield dipped 0.5 basis point to 2.295 percent and the 20-year yield was unchanged at 2.165 percent. The benchmark 10-year yield edged up 0.5 basis point to 1.370 percent, matching a 1-1/2 month high brushed on Thursday. The five-year yield was unchanged at 0.525 percent.
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