JGB yields slump tracking U.S. counterpart amid renewed trade tensions; U.S. 3M/10Y yield curve further inverts

The Japanese government bond yields plunged at close Wednesday, tracking a similar movement in the United States counterpart amid a fresh round of trade tensions worldwide. The U.S. 3-month/10-year yield curve further inverted to nearly 10 basis points as President Trump continue to infuse worries about global economic progress against an anxious atmosphere over trade tariffs.

While the U.S. administration has refrained from terming China as a currency manipulator, it has anyways, broadened its network of watchlist from 12 to 21, only to include Ireland, Italy, Vietnam, Singapore and Malaysia, in addition to already-existing China, Japan, South Korea and Germany; India and Switzerland were removed.

The yield on the benchmark 10-year JGB note, which moves inversely to its price, plummeted 9-1/2 basis points to close at a fresh low of -0.095 percent, the yield on the long-term 30-year edged 1-1/2 basis points lower to 0.479 percent and the yield on short-term 2-year plunged 17 basis points to -0.173 percent.

China said it will further shrink its negative list to open its service sector to foreign investors. Meanwhile, PBoC net injected CNY70 billion of liquidity via the reverse repo yesterday, easing the liquidity pressure caused by the takeover of Baoshang bank. China’s bond market rebounded following the sell-off on Monday, OCBC Treasury Research reported.

In addition, PBoC Governor Yi Gang said the current deposit and lending benchmark interest rates are at reasonable levels and China will continue to push ahead with its interest rate liberalisation plan. China will also study the feasibility of not publishing the deposit and lending benchmark rates, the report added.

Meanwhile, the Nikkei 225 index closed -1.22 percent lower at 21,000.45, while at 06:00GMT, the FxWirePro's Hourly JPY Strength Index remained slightly bullish at 82.23 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex