TOKYO—Japanese government bond yields rose a day after the benchmark 10-year yield dropped to a seven-year low.
The 10-year yield added 0.03 percentage points Friday to 1.09%. Despite the gain, the yield fell 0.05 percentage point on the week as investors fretted that the U.S. economic recovery is sputtering and that China's economy is slowing.
Traders said the downward trend in yields remains intact as expectations linger that major countries will pursue fiscal austerity measures down the road, reducing the supply of bonds and weighing on global economic growth.
A key test will be Tuesday's auction of 10-year Japanese debt. The government is slated to sell 2.2 trillion yen ($25.12 billion) worth of 10-year notes with an expected coupon of 1.1%.
"As risks recede that long-term JGB yields will surge in the near term, it appears that many investors remain willing to buy JGBs," one trader at a Tokyo securities house said. "If the tender goes smoothly, they will likely start to believe that longer-term yields will keep falling and so boost their bond holdings further."
