JGBs remain flat ahead of BoJ’s policy meeting; likely to raise 10-year yield target to 0.25 pct in 2018

Japanese government bonds little changed on Monday as investors remain side-lined in any major deal ahead of the upcoming Christmas and New Year holidays. But, the market still awaited the last monetary policy meeting of 2017 from the Bank of Japan, where no change in policy-setting is expected.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, traded flat at 0.044 percent, the yield on new long-term 40-year remained steady 0.962 percent and the yield on short-term 3-year stood flat at -0.149 percent by 03:30 GMT.

The Bank of Japan is scheduled to announce its monetary policy decision on Thursday (December 21), which we expect to be uneventful, with policy firmly on hold. The central bank is expected to maintain its 'QQE with yield curve control' policy with a negative interest rate.

However, the central bank will raise its target for 10-year bond yields next year from the current level of 0 percent to 0.25 percent.

Today, the BoJ in its daily market operation offered to buy 410 billion yen of JGBs maturing in 5 to 10 years, 300 billion yen of JGBs maturing in three to five years, and 250 billion yen below 3 years.

Lastly, it is interesting to note that, mid-week votes in the House and Senate are planned on the legislation that will reduce corporate and individual tax rates. Lawmakers are aiming for the bill to land on President Donald Trump’s desk for a signature before Christmas, Bloomberg reported.

Meanwhile, Japan’s Nikkei 225 rose 1.34 percent to 22,866.50 by 03:50, while at 03:00GMT, the FxWirePro's Hourly Yen Strength Index remained highly bullish at 102.62 (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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