Japanese government bonds were supported on Tuesday, with the 10-year yield hitting a six-week low at one stage, on speculation the Bank of Japan will take aggressive easing steps at its policy meeting ending later in the day.
* The 10-year cash bond yield fell as low as 0.725 percent , before stepping back to stand flat at 0.735 percent. The benchmark futures contract hit a six-week intraday high of 144.57 before ending morning trade virtually flat at 144.40.
* The BOJ is expected to sign a historic statement with the government to target 2 percent inflation and to announce fresh measures to help achieve that, including an increase in its asset purchase programme.
* A main focus for the bond market is whether the central bank cuts, or scraps, its 0.10 percent interest on excess reserves, which has served as a floor for all money market rates.
* Short- and medium-term note yields have slipped in recent sessions on speculation of such a cut in that interest rate. The five-year bond was at 0.15 percent, flat on the day but just a hair above its record low of 0.145 percent marked in June 2003.
* Medium-term notes would get a boost if the BOJ expanded the target of bond buying in its asset purchase scheme from the current target of bonds with up to three years to maturity, though market players see limited chance of the BOJ doing so.
* On the other hand, longer maturities such as the 30-year have been pressured by concerns that bold BOJ steps could one day lead to inflation.
* The 30-year bond yield rose 1.0 basis point to 1.975 percent, while the 20-year yield rose 1.0 basis point to 1.745 percent.
* The JGB yield curve has been steepening in recent months, with the spread between 10- and 20-year yields hitting a record high of 101.5 basis points last week, as investors expect aggressive easing from the BOJ.
* The steepening also reflects mounting concerns about Japan's snowballing public debt, which amounts to more than 200 percent of its economy.While a huge pool of Japanese private savings has helped spare Japan from the type of turmoil that hit indebted countries in Europe, many investors think Japan's funding capability could become more vulnerable in the future unless it can boost growth.