Japanese government bonds were mixed on Monday, with expectations that the Bank of Japan will stick to its loose policy helping keep the benchmark 10-year yield close to a 10-month low, but views that bonds are getting expensive kept buying in check. Expectations that the Federal Reserve will maintain a measured pace of monetary tightening, which boosted US Treasury prices, also supported the Japanese bond market, traders said.
"Continued reaction to weakness in Japanese economic data is the dominant force, and out of that comes the belief that the BoJ will keep rates low for a while," said John Richards, a fixed income strategist at Barclays Capital.
Buying was limited though as investors remained wary of pushing prices beyond current levels, which some consider high.
The benchmark 10-year March JGB futures contract ended the afternoon session up 0.02 point at 139.45, near Friday's 139.47, its highest since March 12.
The cash benchmark 10-year bond yield was up 0.5 basis point at 1.350 percent.
That is still only slightly above the 1.330 percent hit in mid-December, the lowest since last March.
The yield on five-year JGBs was 0.5 basis point higher at 0.535 percent.
In the sotck market, the benchmark Nikkei average ended up 0.45 percent after opening weaker. The Nikkei has been struggling to break above a key resistance of 11,500.
Minutes from the Bank of Japan's (BoJ) December policy meeting released on Monday showed that two members said a gradual cut in Japan's current account target was worth considering. Some analysts said they expected a lowering in the liquidity target in the near future, perhaps by widening the target range.
Other market players were more interested in reassurances from BoJ Governor Toshihiko Fukui last week that the central bank would not change its policy of flooding the market with excess liquidity, which helps to keep interest rates at zero.
Benchmark three-month euroyen futures for June expiry were flat at 99.905, indicating an interest rate of 0.095 percent at that time.