Japanese bonds trade narrowly mixed ahead of 10-year auction

The Japanese government bonds traded narrowly mixed Monday as investors await 10-year note auction during a relatively quiet session that witnessed data of little significance.

The benchmark 10-year bond yield, which moves inversely to its price, rose 1 basis point to -0.068 percent, the yield on long-term 40-year note fell 1 basis point to 0.529 percent and the yield on short-term 2-year note climbed 1/2 basis point to -0.272 percent by 06:00 GMT.

In term of recent economic data, Bank of Japan third quarter Tankan large manufacturing index stood at 6, expectations was for 7, from 6 in the second quarter of 2016. Additionally, Japan’s September Nikkei final manufacturing PMI came in at 50.4 ('flash' was 50.3), from 49.5 in August.

Moreover, Bank of Japan Governor Haruhiko Kuroda said that the bank still has a lot of room left to ease policy. On the other hand, Bank of Japan ex-board member Nobuyuki Nakahara to aide Japanese PM Abe said that the BoJ's yield curve control and negative rates are mistakes. He added that the central bank Governor Kuroda has ruined his chance of a second term.

Last week, Japan’s national consumer inflation fell 0.5 percent on year in August, matching expectations following the 0.4 percent decline in July. The core CPI, which excludes food prices, also was dipped 0.5 percent, trending in line with expectations and unchanged from the previous month. Additionally, Japanese household spending fell 4.6 percent in August from a year earlier in price-adjusted real terms, showed a sign of persistent weakness in private consumption.

In addition, the Bank of Japan said last week that it lower it's buying of JGBs with 5-10 years of maturity to 410 billion (nearly 4.05 billion U.S. dollar) from 430 billion yen at an operation earlier this week. The central bank decided at its policy meeting last week to keep the 10-year JGB yield around zero percent, and reducing the amount of debt it buys at its regular operations is one way it could achieve that goal.

Meanwhile, the benchmark Nikkei 225 closed up 0.9 percent at 16,598.67 and the broader Topix index closed 0.60 percent higher to 1,330.72 points.