JGBs narrowly mixed in subdued trade; developments in U.S. Treasuries in focus

Japanese government bonds traded narrowly mixed in quiet trading session as investors remained focused on the recent developments in the U.S. Treasury yields, although the big movements were limited as Nikkei 225 continued retreating from 26-year peaks.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, traded flat at 0.051 percent, the yield on long-term 40-year climbed nearly 1 basis point to 0.991 percent and the yield on short-term 2-year declined 1/2 basis point to -0.170 percent by 03:50 GMT.

U.S. Treasury two-year note yields hit a fresh nine-year high overnight as the yield curve resumed its flattening and investors priced in a 25 basis point interest rate hike by the Federal Reserve in December. A flat yield curve suggests the Fed was on course to hike interest rates, while tepid inflation should cap longer-dated yields, Reuters reported.

The yield gap between shorter-dated and longer-dated Treasuries shrank on Monday, with the spread between five-year and 30-year yields at 80.70 basis points. The spread between U.S. two-year note yields and U.S. 10-year notes also contracted to 71.70 basis points.

Meanwhile, Japan’s Nikkei 225 traded 0.34 percent higher at 22,457.00 by 03:55, while at 03:00GMT, the FxWirePro's Hourly Yen Strength Index remained neutral at 14.18 (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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