JGBs inch down slightly on Fed interest rate hike optimism

Japanese government bonds inched lower slightly on Monday as investors remained optimistic about the Federal Reserve interest rate hike on Wednesday and followed by three more next year. Also, strong risk sentiments among investors dragged the bonds.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose ½ bais point to 0.055 percent, the yield on long-term 40-year rose nearly 1/2 basis point to 0.978 percent and the yield on short-term 2-year traded nearly flat at -0.145 percent by 03:50 GMT.

The U.S. Treasuries yields finish off the week a little lower on Friday following steady growth in November employment report that saw a +228k increase in non-farm payrolls, an unchanged unemployment rate of 4.1 percent and a +0.2 percent m/m increase in average hourly earnings. On balance, this all sets up to reaffirm support for a likely 25 basis points rate hike at the December FOMC meeting.

On Friday, the Japan share market finished higher as investor sentiment buoyed by positive lead from Wall Street overnight, the yen's weakening against the dollar, and an upward revision to Japan's gross domestic product data for July-September. Thus pushing the bonds prices lower today.

Lastly, the market will also look forward to the October’s industrial production and Q4 Tankan large manufacturer’s index.

Meanwhile, the Nikkei 225 traded 0.32 percent higher at 22,884 by 03:50 GMT, while at 04:00GMT, the FxWirePro's Hourly JPY Strength Index remained neutral at 50.43 (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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