JGBs rally tracking U.S. Treasuries; 40-year auction attracts sufficient demand

The Japanese government bonds rallied for the second consecutive day Tuesday, tracking firmness in U.S. Treasuries after investors sought refuge in safe-haven assets following President Donald Trump’s withdrawal from the Trans-Pacific Partnership (TPP) trade deal on Monday.

Also, the super-long 40-year JGB auction held on Monday, received sufficient response amid the Trump-call on various other trade deals, as well.

The benchmark 10-year bond yield, which moves inversely to its price, edged down 1-1/2 basis points to 0.04 percent, while the long-term 30-year bond yields fell nearly 1 basis point to 0.78 percent and the yield on the short-term 2-year note remained nearly flat at -0.24 percent by 06:20 GMT.

Tuesday’s 40-year JGB auction worth JY500 billion witnessed the bid-to-cover ratio rising to 2.99, from 2.97 in the previous auction on spurt in demand for global safe-haven assets.

Also, investors are curiously eyeing the release of December consumer price inflation data, scheduled for Friday, besides, the Bank of Japan’s (BoJ) first 2-day monetary policy meeting 2017, scheduled to be held on January 31.

Lastly, we foresee that the central bank will remain committed to hold its 10-year JGB yields near zero, while keeping interest rate steady at -0.10 percent.

Meanwhile, Japan’s Nikkei 225 closed 0.49 percent lower at 18,798, while at 6:00GMT, the FxWirePro's Hourly Yen Strength Index remained highly bullish at 100.53 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex