JGBs rise modestly as BoJ keeps policy intact; bank continues to target 10-year yields near zero

The Japanese government bonds traded modestly firmer Tuesday after the Bank of Japan left its interest rate unchanged at -0.10 percent, while targeting 10-year bond yields at zero percent.

The benchmark 10-year bond yield, which moves inversely to its price, fell 1/2 basis point to 0.07 percent, the long-term 30-year bond yield also dipped nearly 1 basis point to 0.68 percent and the yield on short-term 2-year note dipped nearly 1 basis point to -0.18 percent by 04:00 GMT.

We foresee that the bond prices will keep drifting between small gains and losses in quiet trading due to a long global Christmas holidays.

At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided to keep its benchmark interest rate unchanged at record low of -0.10 percent. The BoJ in its policy statement noted that it will purchase Japanese government bonds so that 10-year JGB yields will remain at around zero percent.

Additionally, with regard to the amount of JGBs to be purchased, the Bank will conduct purchases at more or less the current pace -- an annual pace of increase in the amount outstanding of its JGB holdings of about 80 trillion yen -- aiming to achieve the target level of the long-term interest rate specified by the guideline.

Meanwhile, the benchmark Nikkei 225 traded 0.15 percent higher at 19,420 by 04:00 GMT. While at 04:00 GMT, the FxWirePro's Hourly Japanese Yen Strength Index remained highly bullish at +107.47 (higher than +75 represent a bullish trend).