JGBs slide as investors book profits ahead of long New Year holidays

The Japanese government bonds snapped previous gains on Friday as investors booked profits ahead of long New Year holidays. We foresee that bond prices will keep drifting between small gains and losses in quiet next week’s trading session.

Also, trading activity to resume after New Year celebrations, probably from the second week of January, 2017 as global market receives no more important data till then. The market will now directly open on Wednesday, January 4 for half day trading.

The benchmark 10-year bond yield, which moves inversely to its price, fell 1 basis point to 0.052 percent, the long-term 30-year bond yields climbed 1-1/2 basis points to 0.72 percent and the yield on short-term 3-year note bounced nearly 1 basis point to -0.13 percent by 05:10 GMT.

The Bank of Japan in its December two-day monetary policy meeting’s summary of opinions mentioned that under the framework of yield curve control, the yield curve has been formed smoothly in a manner consistent with the guideline for market operations. The Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control has been functioning as intended thus far, and is contributing to economic recovery and price increases.

Additionally, the central bank should conduct market operations so that 10-year Japanese government bond (JGB) yields are kept at zero percent. The current situation presents a good opportunity to achieve the price stability target of 2 percent.

However, one of its members voted against keeping 10-year bond yields at zero percent and suggested to allow long-term interest rates to increase if such moves reflected improvements in the economy.

Meanwhile, the benchmark Nikkei 225 traded 0.15 percent higher 19,173. While at 05:00 GMT, the FxWirePro's Hourly Japanese Yen Strength Index stood neutral -50.97 (lower than -75 represent a bearish trend).

FxWirePro: JGBs Technical Assessment: Weekly Momentum Bearish

With a break below 150, which lead the price to 149 followed by 148 further out. The pair may stall around the price 150. Back above 152 will force to revalue.

 RES 3:                   153.000  **

 RES 2:                   152.000  **

 RES 1:                   151.500  **

 30-Dec            LAST   150.200

 SUP 1:                   149.000  *

 SUP 2:                   148.000  *

 SUP 3:                   147.000  **

 Japanese Government bonds (JGBs) analysis bias:

 1-Week Objective: DOWN to 149: Conviction: Strong

 4-Week Objective: DOWN to 147 : Conviction: Weak