Japanese government bonds fell on Friday as Tokyo share prices rebounded and US Treasuries declined overnight. The summit of leaders from the Group of 20 industrialised and emerging nations in Washington on Friday and Saturday kept players wary of taking positions, traders said.
"Players were selling JGBs as stocks rebounded and Treasuries fell, and there is caution before the summit meeting," said a dealer at a Japanese securities firm. "If the meeting offers steps to bolster global growth or ease financial jitters, there could be more of a shift of funds to riskier assets such as stocks.
Bond investors are probably trimming positions to be neutral before the meeting," the dealer said. . The Nikkei share average ended morning trade up 4.26 percent. The 10-year yield inched up 1 basis point to 1.500 percent while 20-year yields rose 1.5 basis points to 2.140 percent.
Shorter dated maturities outperformed, with the two-year yield falling 2 basis points to 0.550 percent while the five-year yield inched up 0.5 basis point to 0.905 percent. Traders said ample funding operations by the Bank of Japan over the past couple of days raised speculation about beefed-up attempts by the central bank to ease the tightness in the JGB repo market, which has limited a drop in yields of shorter maturities.
The BOJ pumped in a total of 3 trillion yen ($30.69 billion) for "term" funding in the morning, to start on Tuesday. On Thursday, the BOJ took aggressive funding operations to start on Monday, the first day of the new monthly reserves maintenance period, when a temporary scheme in which interest will be paid on excess reserves at the central bank will take effect. ($1=97.75 Yen).