JGBs gain after May retail sales miss market expectations; host of 2-tier economic data in focus

The Japanese 10-year government bonds gained during late Asian session Thursday after the country’s retail sales for the month of May missed market expectations ahead of a host of 2-tier economic data later today and tomorrow.

The yield on Japan’s benchmark 10-year bond, which moves inversely to its price, slipped 1/2 basis point to 0.03 percent, the yield on the long-term 30-year also fell 1/2 basis point to 0.71 percent and the yield on short-term 3-year traded flat at -0.11 percent by 06:00GMT.

Japan’s retail sales fell in May by the most in nearly two years, pointing to weaker consumption that could restrain any rebound in the economy following a contraction in the first quarter. Retail sales fell 1.7 percent in May (forecast -0.8 percent) from April, when they rose a revised 1.3 percent. Sales increased 0.6 percent from a year earlier (forecast +1.4 percent).

Further, bond prices remained tilted to the downside after an auction of one trillion yen 20-year bonds attracted tepid demand, producing one of the weakest results. The auction’s tail, or the gap between the lowest and average prices, was 0.08, much larger than 0.02 in the previous auction and the average over the past 12 months of around 0.04.

Demand was limited as yield stayed near 0.50 percent, just above this year’s low of 0.495 percent marked in April.

Meanwhile, the Nikkei 225 index closed 0.05 percent higher at 22,282.50, while at 06:00GMT, the FxWirePro's Hourly JPY Strength Index remained slightly bullish at 81.81 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex