Japanese government bonds trimmed earlier losses on Friday after weaker than expected machinery orders cast doubt on whether the Bank of Japan will raise interest rates this month.
Government data showed core private-sector machinery orders, a key gauge of corporate capital spending, rose 2.8 percent in October from September, compared with a consensus forecast for a rise of 6.2 percent. "The market reacted to the softer-than-forecast machinery data, seeing some bond buybacks," said Tatsuo Ichikawa, chief JGB strategist at ABN Amro.
The yield on three-month financing bills rose 1 basis point to 0.51 percent, the highest since December 2000. The benchmark 10-year yield rose 2 basis points to 1.690 percent, well above a nine-month low of 1.585 percent hit on Monday.
The March futures contract eased 0.22 point to 133.94 off the session low of 133.86.
The volume of the March futures contract exceeded that of the December contract earlier in the session. The December contract was down 0.14 point at 134.66 against a nine-month high of 135.66 marked on Monday. The five-year yield was up 1.5 basis points at 1.260 percent after rising to a six-week high of 1.265 percent just before the release of the machinery data.
The two-year yield was flat at 0.845 percent. It rose as high as 0.855 percent on Thursday, the highest level since July 13. The BoJ boosted the overnight call rate to 0.25 percent from zero on July 14 in its first rate increase in six years. The 20-year yield climbed 2.5 basis points to 2.065 percent as dealers unwound recent curve-flattening trade. The yield curve steepened as a result.