TOKYO: Japanese government bond (JGB) yields edged lower on Monday as investors moved cautiously ahead of the Bank of Japan’s (BOJ) first monetary policy decision of the year.

The 10-year JGB yield was last down 0.5 basis point (bp) at 0.660%, after sinking as low as 0.650% in the Asian trade.

Benchmark 10-year JGB futures rose 0.15 yen to 146.83 yen.

Despite seeing some buybacks earlier in the day, the overall cash market was a bit sluggish, with “many investors watching developments” as the Bank of Japan’s policy meeting begins, said Makoto Suzuki, senior bond strategist, Okasan Securities.

Market expectations for the BOJ to end its ultra-loose monetary policy in January have been extinguished, with economic data on Friday that showed domestic core inflation slowed for a second straight month.

Instead, the focus will be any hints BOJ chief Kazuo Ueda could offer at the press conference at the conclusion of the central bank’s two-day meeting on Tuesday, with many now betting it could exit negative interest rates in March or April.

If Ueda fails to provide comments specifying future policy revisions, “the room for a decline in (JGB) yields will be limited,” Suzuki said.

Yields move inversely to bond prices. An easing of US Treasury yields, to which the Japanese bond market tends to be sensitive, also added downward pressure on JGB yields on Monday.

JGB yields rise amid caution for 20-year bond auction

The US 10-year Treasury yield last hovered around 4.11% during Asian trading hours.

The two-year JGB yield and five-year yield fell 0.5 bp each to 0.020% and 0.245%, respectively.

On the superlong end, the 20-year JGB yield declined 1 bp to 1.460%, dropping from the one-month peak of 1.470% touched on Friday. The 30-year JGB yield was flat at 1.770%.