JGBs close lower after better-than-expected U.S. NFP narrows chances of aggressive rate cuts

The Japanese government bonds closed lower on the first trading day of the week Monday following a better-than-expected rise in the United States non-farm payrolls data for the month of June led to hopes of a lesser aggressive rate cut by the Federal Reserve, which weighed on debt prices.

At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, rose 1-1/2 basis points to -0.155 percent, the yield on the long-term 30-year surged nearly 2 basis points to 0.350 percent and the yield on short-term 2-year edged tad 1 basis point higher to -0.205 percent.

US treasury yields rebounded strongly across the curve while the dollar index rose after the data. The 224K non-farm job increase, which does not justify a rate cut in normal circumstance, is likely to make the Fed’s job harder in July’s meeting, OCBC Treasury Research reported.

From the perspective of an insurance cut, the current data is probably not strong enough to rule out the Fed’s commitment for a pre-emptive move, although it may temper expectations of an aggressive insurance cut of 50bps in July.

However, markets will closely watch out for Fed Chairman Powell’s testimony to Congress on Wednesday and Thursday amid the renewed attack from President Trump, who repeated his call for the Fed to lower its interest rates to boost the economy last Friday, the report added.

Meanwhile, the Nikkei 225 index closed over 1 percent down at 21,524.50, while at 06:00GMT