Ten-year JGB yield rebounds from near-decade low, superlongs in demand

(Reuters) - Yields on benchmark 10-year Japanese government bonds pulled back from a near-decade low on Friday, as investors took some profit ahead of next week's auction of similar maturities and a Bank of Japan policy meeting.

The 10-year yield climbed 1.5 basis points to 0.525 percent, off its lowest level since June 2003, when it plumbed a record low of 0.430 percent on the back of quantitative easing by the BOJ.

Despite Friday's rebound, the yield on the benchmark bond has fallen 27 basis points since the start of January, heading for its biggest quarterly fall in nearly three years, on mounting expectations that the central bank will embark on aggressive monetary policy easing to revive the world's third-largest economy.

"We have the BOJ next week - we don't know what kind of outcome that will have. We have the 10-year auction, we have nonfarm payrolls. It's good to take some profit right here," said Tadashi Matsukawa, head of fixed-income at Pinebridge Investments in Tokyo.

"This is probably a temporary market adjustment. It all depends on what the BOJ is going to do next week or at its meeting at the end of April."

A two-day BOJ policy meeting starts on Wednesday, with another scheduled for later in the month, while the United States will release its key jobs report on April 5.

The Ministry of Finance is set to sell 2.4 trillion yen ($25.5 billion) of 10-year bonds on Tuesday.

Ten-year JGB futures shed 17 ticks to 145.69 after hitting a record high of 145.98 in the previous session. Trading was active in the morning session, with 17,014 contracts changing hands, ahead of Thursday's full-day of 16,970.

Matsukawa said he had bought some 10-year futures on dips in the morning. "I may sell going to the close if the market rebounds from here," he said, adding that he may also cash in on gains in 20-year bonds.

The 20-year yield slipped 2.5 basis points to 1.380 percent, reaching a near-decade low for the second day in a row.

It has dropped 37.5 basis points so far this quarter, on track for its sharpest three-month fall since October-December 2008, when the global economy was reeling from its worst recession since the Great Depression in the 1930s.

The 30-year yield eased 2 basis points to 1.540 percent, also a near-decade trough. It is down 43.5 basis points since the beginning of January and is on track for its biggest quarterly fall since late 2008.

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