Japanese government bonds rallied on Friday, with the benchmark yield posting its biggest one-day decline in two years, as a surge in US yields paused and allowed the market to take back ground lost after a week of heavy losses. The bounce in US Treasuries after a sharp two-day plunge prompted investors to wade in and pick up bonds at bargain prices, including the new five-year JGBs offered the previous day with a much higher coupon.
"The slide in JGBs this week can be blamed mostly on selling by investors trying to cut losses as their foreign bond holdings suffered," said a fund manager at a domestic asset management firm. March 10-year futures gained 0.59 point to 139.71 on short covering after going as low as 139.01 on Thursday. The 30-year yield fell 4 basis points to 2.215 percent.
The benchmark 10-year yield declined 7.5 basis points to 1.185 percent, pulling sharply away from a six-month high of 1.270 percent marked the previous day. Purchases by investors such as pension funds and banks boosted the long-end, market players said.
The five-year yield dropped 4 basis points to 0.525 percent following an auction of the maturity the previous day, at which Japan's Ministry of Finance raised the coupon by 20 basis points to 0.5 percent, the highest in seven months.
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