10-year JGB yields continue to recover on improvement in global risk appetite, lower-than-expected industrial production

10-year Japanese government bond yields continued to recover during late Asian session Thursday as global risk appetite started to improve with the political situation in Italy cooling down, coupled with a lower-than-expected industrial production for the month of April, which further weighed on bond prices.

The yield on the benchmark 10-year JGB note, which moves inversely to its price, rose nearly 1 basis point to 0.03 percent, the yield on the long-term 30-year note climbed 1-1/2 basis points to 0.71 percent and the yield on short-term 2-year traded tad higher at -0.14 percent by 05:25GMT.

Market risk aversion over the Italian political drama ebbed (as parties are said to be trying to find a compromise for the economy minister) and Italy sold EUR5.57 billion bonds (which is at the higher end of EUR3.75-6.0 billion). Over in the US, Wall Street rose overnight, but the 10-year UST bond yield did not fully unwind the previous day’s rally with a 7 bps rise to 2.85 percent. 

Industrial output rose just 0.3 percent in April from the previous month, official data showed on Thursday, well below the median forecast for a 1.2 percent increase and a 1.4 percent rise in March. Much of the slowdown was due to a 5.6 percent decline in production of electronic parts while inventories rose for a third straight month, adding to fears of weakening overseas demand.

The output is seen likely to weaken further as companies focus on lowering inventories of unsold goods, suggesting Japan’s economic performance peaked last year and this year growth will be more modest, Reuters reported.

Meanwhile, the Nikkei 225 index rose 0.77 percent to 22,188.50 by 05:30 GMT, while at 05:00GMT, the FxWirePro's Hourly JPY Strength Index remained highly bullish at 105.43 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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