JGBs gain at close on solid demand at super-long 40-year auction; eyes on April industrial production

The Japanese government bonds closed higher Tuesday after investors showed ample demand at the super-long 40-year auction held early today, while still eyeing the Bank of Japan (BoJ) Governor Haruhiko Kuroda’s speech, scheduled to be held on May 29 and the country’s industrial production data for the month of April, due on the following day by 23:50GMT for further direction in the debt market.

At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, dived 4 basis point to -0.074 percent, the yield on the long-term 30-year edged 1-1/2 basis points lower to 0.494 percent and the yield on short-term 2-year suffered 5 basis points to -0.159 percent.

The new 40-years were seen to have drawn bids from life insurers and pension funds, the core buyers of super-long JGBs. The bid-to-cover ratio, a gauge of demand, at today’s JPY400 billion ($3.65 billion) JGB sale rose to 3.87 from 3.50 at the previous auction in March, Reuters reported.

Lastly, US markets were closed for holiday yesterday, whilst European bourses rose following the weekend European Parliament elections. Key overnight news was US president Trump opining that the US is “not ready” to make a trade deal with China yet, but “they probably wish they made the deal that they had on the table before they tried to renegotiate it”.  In China, the regulators takeover of Baoshang Bank Co for “serious” credit risks has heightened uncertainty in the interbank market, OCBC Treasury Research reported.

Meanwhile, the Nikkei 225 index closed 0.37 percent higher at 21,260.00, while at 07:00GMT, the FxWirePro's Hourly JPY Strength Index remained slightly bullish at 83.58 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex