TOKYO, Nov 25 - Japanese government bond prices slid on Thursday after the 10-year futures contract hit an 8-month high early in the day, with investors cashing in on gains driven by worries a strong yen will sap economic growth.
JGB prices rose sharply earlier in the session as the dollar fell to a 4-Ѕ year low against the yen and hurt the stock market, especially exporters and chip-making firms.
But both domestic and foreign investors were becoming wary of extending gains amid a lack of fresh news and current low yields.
Few in the market expect Japan's economy to stall or yields to fall much more despite recent sluggish economic data.
"As top banks' mid-term results showed, they weren't making money out of JGB investments, making it clear that now isn't the time to aggressively build up JGB portfolios when interest rates remain at low levels," said Masuhisa Kobayashi, chief fixed income strategist at Merrill Lynch.
"Many see 10-year yields to be in a 1.4-1.6 percent range and market players lacked evidence to test below a September low of 1.38 percent," Kobayashi said.
The key 10-year JGB yield <0#JPTSY=JBTC> closed up 1.0 basis point at 1.41 percent after falling as low as 1.385 percent, its lowest since Sept. 28.
The five-year yield rebounded 1.5 basis points to 0.57 percent after hitting 0.545 percent, its lowest since March 25.
The 20-year yield also bounced back 0.5 basis point to 2.03 percent after falling as low as 2.01 percent.
The 10-year futures contract <0#2JGB:> shed 0.10 point to 138.86 after rising as high as 139.18 -- levels not seen since mid-March.
The Ministry of Finance auctioned 1.7 trillion yen ($16.53 billion) of 0.1 percent two-year JGBs. The offer drew healthy demand with a bid-to-cover ratio of 14.42, as investors awash with funds showed strong interest in the short-term sector.