Japanese government bonds were almost flat on Friday after a sharp fall in Tokyo shares helped the market erase earlier losses triggered by a drop in US debt prices. A Bank of Japan purchase of 290 billion yen ($3.5 billion) of JGBs also supported the market. As the bank had already bought 560 billion yen of JGBs earlier in the week, few expected another round of bond purchases, traders said.
March 10-year JGB futures ended up 0.01 point at 139.74, having recovered from the day's low of 139.42 after the Nikkei share average tumbled to a three-week low on profit-taking after a recent rally. The bottom of the cloud will be at 140.55 on Monday and will gradually come down to 139.96 by the end of the next week.
In the cash bond market, the yield on the benchmark 10-year cash bonds was also flat at 1.205 percent, coming off a one-month high of 1.260 percent hit earlier in the week and almost flat on the week as well. JGB yields have dropped after Thursday's auction of 20-year JGBs drew strong demand.
Twenty-year bonds continued to outperform other maturities even on Friday, with their yield falling 1.0 basis point to 1.975 percent, whereas other maturities remained mostly flat. Traders say the market will be supported next week as there will be no major long-term bond auction, though a majority of market players think much will depend on US debt market, which JGBs track fairly closely. US bond yields jumped on Thursday, with their 10-year yield rising near its recent high around 3.5 percent.