Japanese government bond prices closed mixed on Monday in muted trading ahead of the release of economic data and the two-year bond auction.

Akitsugu Bando, senior economist at Okasan Securities, said some end of the month buying supported the bond market but most investors opted to wait out events due this week.

Japan is set to announce the June unemployment rate, household spending and retail sales on Tuesday and the industrial production data on Wednesday.

Also the finance ministry will auction 1.7 trillion worth of 2-year bonds on Tuesday, with the coupon expected to be set at 0.8 percent, lower than the previous auction’s 0.9 percent for the same maturity held last month.

“Considering recent auctions which showed smaller tails, the auction tomorrow is expected to draw solid demand,” said Katsutoshi Inadome, a strategist at Mitsubishi UFJ Securities.

A tail is the spread between the lowest accepted price and the average bid and a wider tail is an indication of weak demand.

The market is also awaiting U.S. economic data this week including gross domestic product for the second quarter and the latest employment report.

The U.S. GDP data due on Thursday may unveil a strong number but that could be the impact of the U.S. government’s tax rebate measure which should be temporary, said Inadome, who expects market players to zero in on the July employment report on Friday.

The yield on the benchmark 10-year bond fell to 1.565 percent from 1.575 percent on Friday.

The yield on the two-year bond rose to 0.790 percent from 0.775 percent, while the yield on the five-year note was steady at 1.140 percent.

There were no successful transactions in the 20-year and 30-year bonds.

Bond prices move inversely to yields.

The price of the September futures contract slipped to 135.88 yen from 135.94 yen on Friday.

($1=107.70 yen)

Source: http://www.afxnews.com

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