Japan's 10-year bonds fell for a third day after a government report showed retail sales accelerated last month, adding to signs the world's second-largest economy is recovering.
Ten-year bond futures for June delivery dropped 0.19 to 138.14 at the Tokyo Stock Exchange. The contracts earlier touched 138.11, the lowest since November 12.
Bond investors were also jitterish ahead of closely watched data due this week which could fuel views that economic conditions are continuing to improve.
"Superlongs were hit the most, acting as a drag on the market. It was a reversal of what we saw last week, when futures were weak while superlongs were supported," said Takafumi Yamawaki, a senior rates strategist at BNP Paribas Securities.
Ten-year yields climbed to the highest level since November after the Trade Ministry said sales at retailers increased at the fastest pace in a decade. The difference in yields between two- and 10-year notes expanded to the widest since May 2006 before the Bank of Japan's Tankan report this week that economists said will show confidence among the nation's largest manufacturers improved.
Also the spread between two- and 10-year yields expanded to 1.23 percentage points yesterday amid speculation the central bank will keep interest rates low to combat deflation.
"Yields will have a rising bias this week," said a senior bond strategist at Mitsubishi UFJ Securities, a unit of Japan's largest bank by assets.
The yield on the 1.4 per cent bond due March 2020 climbed two basis points, or 0.02 percentage point, to 1.395 per cent in Tokyo at Japan Bond Trading, the nation's largest interdealer debt broker. The yield is at the highest since Nov. 12. The price fell ¥0.176 to ¥100.043. Ten-year yields may rise as high as 1.43 per cent this week, Mitsubishi UFJ's Tonouchi said.
The 30-year yield rose 3.5 bps to 2.295 per cent. The five-year yield edged up 0.5 basis point to 0.550 per cent and the two-year yield gained 0.5 basis point to 0.165 per cent, the highest in two months.