JGBs step back after U.S.-China calls ceasefire on trade tensions; 10-year auction eyed

The Japanese government bonds stepped back at close of trading Monday after trade talks resumed between the United States and China at the G-20 Summit over the weekend, improving investors’ risk-taking sentiments and thus weighing on debt prices.

At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, surged 1-1/2 basis points to -0.150 percent, the yield on the long-term 30-year jumped 2 basis points to 0.383 percent and the yield on short-term 2-year also traded higher at -0.221 percent.

The US and China agreed to a trade ceasefire after a 80-minute meeting, holding off on new tariffs and resuming trade consultations. In response, China will start buying large amounts of American agricultural products. In fact, China purchased 544,000 metric tons of soybeans from the US last Friday, according to the US Agriculture Department, Scotiabank reported.

"The dollar/yuan would reach the 6.4 level seen last June should the US and China reach a trade deal finally, in response to both further improving risk sentiment and potential demand from the US side in exchange for the US lifting all the additional tariffs," the report added in its comments.

Meanwhile, the Nikkei 225 index closed a whopping over 2 percent higher at 21,729.97, while at 06:00GMT, the FxWirePro's Hourly JPY Strength Index remained neutral at -68.62 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex