JGBs marginally lower after Nikkei registers biggest daily gains in three months

The Japanese government bonds traded modestly lower on Monday after Nikkei registered its biggest daily gain in three months, following a clear win by the government in upper house elections.

The yield on the benchmark 10-year bonds, which moves inversely to its price rose 1/2 basis points to -0.273, short-term 2-year JGB yield rose nearly 1 basis point to -0.345 percent, super-long 40-year bonds rose ½ basis points to 0.121 percent and the yield on 20-year JGB also bounced nearly 1 basis point to 0.056 percent by 07:00 GMT.

The Japan's upper house election over the weekend concluded with a win for Prime Minister Shinzō Abe and his coalition partners. The winning team might have scored big enough to have a 2/3 'super majority' in the upper house. If they do get this, it will make constitutional reform much easier for Abe.

Moreover, the Japanese PM Abe confirmed that he will instruct economy minister Nobuteru Ishihara tomorrow to compile economy stimulus package and ask to implement economic measures to support domestic demand. He further added that economic steps to encourage future investment and will issue construction bonds to fund stimulus package, first time in 4 years.

Furthermore, he said that global economy faces various risks and must strengthen global co-ordination to address uncertainty and support world growth. Will accelerate exit from deflation as much as possible and will consider scale of economic measures from here on, he added.

Lastly, investors will remain keen to focus on the 30-year bond auction Tuesday. Meanwhile, the benchmark Nikkei 225 index closed higher 3.98 percent at 15,708.82 and the broader Topix index closed up 3.79 percent to 1,255.79 points.