Japanese government bonds staged a rebound on Friday with futures bouncing back from an eight-month low while cash bonds drew support from bargain hunting as stocks paused after their recent surge. JGBs were also supported by the minutes of the Bank of Japan's February 14 policy board meeting, which underscored the central bank's commitment to monetary easing to beat deflation.
"While we expect yields to gradually keep rising in the new fiscal year (from April 1), the BOJ is determined to keep rates low and this will cap yields, particularly at the short end," said a fund manager at a European asset management firm in Tokyo. Ten-year JGB futures ended up 0.14 point at 141.22 in active trading, with a hefty 61,217 contracts changing hands. The contract fell to an eight-month low on Thursday in its biggest two-day drop since October 2008, on aggressive selling by hedge funds.
The yield on the latest 10-year JGB fell 1.5 basis points to 1.045 percent, after touching a three-month high of 1.060 percent on Thursday. Demand from life insurers ahead of the end of Japan's business year is expected to continue supporting cash bonds in the coming weeks, many market participants say. A 20-year JGB auction on Thursday was in line with anticipated strong demand from insurers. The 20-year yield sank 1.5 basis points to 1.810 percent, after rising to a three-and-a-half-month high of 1.830 percent on Thursday. The 5-year yield also shed 1.5 basis points to 0.360 percent, moving away from Thursday's three-and-a-half-month high of 0.375 percent.