JGBs fall after risk sentiments improve; June industrial production better than market expectations

Japanese government bonds fell Tuesday as risk sentiments improved and investors shifted away from safe-haven buying after the Turkish political disturbance calmed to some extent, following the intervention of the country’s central bank to provide more liquidity and bring a halt to the unstoppable decline in the lira.

Also, Japan’s industrial production for the month of June came in better than market expectations, albeit still in the negative territory (-1.8 percent), from -2.1 percent in May.

The yield on the benchmark 10-year JGB note, which moves inversely to its price, slipped nearly 1 basis point to 0.105 percent, the yield on the long-term 30-year note jumped 1-1/2 basis points to 0.846 percent and the yield on short-term 2-year traded tad higher at -0.111 percent by 05:20GMT.

Turkey’s worsening currency crisis sent world equities lower and cut into the value of emerging market stocks and currencies on Monday, while boosting the prices of German bonds and other stable assets, Reuters reported.

Turkish headlines remained the key driver of market volatility overnight, with market concerns about contagion as the Turkish lira breached the 7 handle against the USD for the first time on record and despite the central bank’s efforts to provide liquidity by cutting reserve requirement ratios for all lira liabilities by 250 basis points, OCBC Treasury Research reported.

Meanwhile, the Nikkei 225 index jumped nearly 2.00 percent to 22,265.50 by 05:30 GMT, while at 05:00GMT, the FxWirePro's Hourly JPY Strength Index remained highly bullish at 121.54 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex