JGBs sag on firm risk appetite

The Japanese government bonds slid on Wednesday as investors cooled on safe-haven instruments amid gains in riskier assets including crude oil and equities. Also, higher Q1 Gross Domestic Product (GDP) supported the cause.

The yield on the benchmark 10-year bonds, which moves inversely to its price rose 1 basis points to -0.106 percent, yield on super long 20-year bonds also climbed 1 basis point to 0.234 percent and the yield on short term 2-year bonds bounced ½ basis point to -0.240 percent by 08:20 GMT.

Japan’s economy grew slightly more than the government initially reported for the first quarter, helped by a fractional revision in private consumption and business investment that dropped less than first thought.

Gross domestic product expanded by an annualized 1.9 percent in the three months ended March 31, more than a preliminary reading of 1.7 percent, according to revised data from the Cabinet Office released on Wednesday. The median estimate of economists surveyed by Bloomberg was for a 1.9 percent increase.

Meanwhile, private consumption came unrevised at 0.9 percent and business spending revised down to -0.7 percent from -1.4 percent (consensus was to be revised to -0.4 percent). Consumption contributed 0.4 pp compared to 0.3 percentage point in the previous quarter. Public investment stood unchanged at 0.0 percentage point, whereas capex fell 0.1 percentage point vs -0.2 percentage point. Also, inventories fell 0.1 percentage point compared to 0.0 percentage point last quarter.

The JGBs have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Bank of Japan's target. Today, crude oil prices jumped beyond $50 mark by hitting 2016 high as supply disruptions in Nigeria and likely declines in the U.S. crude inventories and production fuelled bullish sentiment. The International benchmark Brent futures rose 0.08 percent to $51.48 and West Texas Intermediate (WTI) jumped 0.20 percent to $50.46 by 05:15 GMT.

Meanwhile, the benchmark Nikkei 225 index closed up +0.93 percent at 16,830.92, and the broader Topix index also closed higher 0.76 percent to 1,350.97 points.