Benchmark Japanese government bonds edged down on Friday, though superlong maturities rose after a 40-year auction met with solid demand.
The 10-year cash JGB yield added half a basis point to 0.070 percent, while 10-year JGB futures ended flat on the day at 150.48.
The Ministry of Finance offered 500 billion yen ($4.49 billion) of 40-year JGBs. The highest yield was 0.985 percent at the Dutch-style auction, in which all successful bidders paid the lowest accepted bid.
The bid-to-cover ratio was 3.67, above 3.00 at the previous tender in November. A higher bid-to-cover ratio indicates stronger demand.
“We know that 40-year issuance will be reduced next fiscal year, which helped demand,” said Naomi Muguruma, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.
On Tuesday, the BOJ’s decision to trim its purchases of 10- to 25-year JGBs and 25- to 40-year JGBs by 10 billion yen in each zone from its previous operations, to 190 billion yen and 80 billion respectively.
The move raised fears that Japan’s central bank could be gearing up to trim its massive stimulus. The BOJ maintained its buying ranges on Thursday.
“I think foreigners and hedge funds probably built steepeners after they saw the BOJ’S reduction on Tuesday, but they realized that probably this is not the beginning of the exit, so they unwound steepeners today,” Muguruma said.
The 40-year yield was 1.5 basis points lower at 0.995 percent.
Elsewhere in the superlong zone, the 20-year yield edged down half a basis point to 0.585 percent, while the 30-year yield shed 1 basis point to 0.830 percent .