By TAKASHI MOCHIZUKI TOKYO—Japanese government bond yields barely budged in subdued trading ahead of Wednesday's 20-year auction. The benchmark 10-year yield eased 0.005 percentage point Tuesday to 1.225%. Moody's Investors Services' downgrade of Greek government bonds to junk status fueled concerns over European debt issues and drove demand for bonds. Yet investors were reluctant to increase their bond holdings too much on concerns that the 20-year sale could see poor demand, triggering a selloff, analysts said. The government will sell 1.1 trillion yen ($12.03 billion) of the super-long-term bonds, and investors expect the coupon on the new issues to be 2.0%, its lowest level since March 2009. The 20-year yield edged up 0.005 percentage point to 1.970% on the day. "There's no reason to buy 20-year JGBs aggressively below 2.0%," said Katsutoshi Inadome, a strategist at Mitsubishi UFJ Morgan Stanley Securities. Yields across the curve are already low, analysts said. But some said the five-year yield may still have room to fall. Tuesday, it eased 0.005 percentage point to 0.410%. "The five-year JGB yield is still relatively higher than yields at the shorter end of the curve. It could fall toward 0.3% in the longer-term," said Daiwa SB Investments fund manager Masahiro Oda. Meanwhile, the market shrugged off an announcement by the Bank of Japan's policy board Tuesday that it would make 3 trillion yen of low-cost funds available to private banks to lend to companies. The amount was in line with analysts' expectations and had been fully factored into the market, Mr. Oda said.

Source