Japanese government bond futures climbed on Friday supported by uncertainty over Greece's debt problems and signs of slowdown in the global economy, pushing the benchmark 10-year yield to a seven-month low. But profit-taking emerged and the 10-year paper erased some gains with players seen shifting their money to relatively inexpensive maturities.
"Unless the US 10-year yield decisively breaks below 2.9 percent, JGBs are likely to stay in their current range. But the recent rise in (overseas) short-term yields is alarming, and this is something we should be monitoring," said Yusuke Ikawa, rates strategist at RBS Securities. JGB yields hit multi-month lows as bids from investors emerged broadly earlier on Friday, taking cues from a rise in US Treasuries, with the benchmark 10-year yield breaching the key 1.1 percent level and marking a seven-month low.
Japanese short-term rates, however, have remained steady as they are supported by prospects of monetary policy staying loose. They have also been helped by demand from foreign investors seen shifting short-term funds out of Europe. Cash bonds in five-year and longer maturities such as 20- and 30-year outperformed 10-year debt. The 20-year yield fell to a six-month low of 1.875 percent, while the yield on five-year bonds was down 0.5 point at 0.395 percent. September 10-year JGB futures were 0.06 point higher at 141.31, after marking a fresh 6-1/2 month high of 141.44 on Friday, with the largest volume in a week.