Japanese government bond futures rose on Friday as the stock market retreated from a seven-year high, from last week. JGBs have been finding their footing this week in the aftermath of a heavy sell-off on concerns about climbing global bond yields and the growing view that the BoJ will lift rates to 0.75 percent in August, which had driven the futures contract to a seven-year low.
"The bond market's moves had been led largely by outside factors such as US Treasuries and (Japanese) stocks," said Nhan Ngoc Le, fixed-income strategist at ABN AMRO. "The market will likely continue to consolidate for now," he said.
The benchmark 10-year yield slipped 2.5 basis points to 1.895 percent, down from an 11-month high of 1.985 percent hit last week.
The five-year yield slipped 2 basis points to 1.495 percent, pulling further back from 1.605 percent hit last week, which was the highest since the Ministry of Finance began offering the maturity in 2000. The yield on two-year note declined 1.5 basis points to 1.005 percent.
Dealers said expectations for a BOJ rate hike in August are making it difficult to aggressively buy the two-year yield below 1 percent and the five-year yield below 1.5 percent.
Gains in longer maturities led those on shorter ones, shrinking the spread between two- and 10-year JGBs to around 88 basis points, down from a four-month high around 91 basis points hit on Thursday and flattening the yield curve.
The yield on the 95th 20-year bond was down 2 basis points to 2.275 percent. Investors picked up the new issue despite initial weak demand at an auction on Thursday.