JGBs strengthen as investors seek refuge in safe-haven assets amid failure of Italian referendum

The Japanese government bonds strengthened Monday as investors sought refuge in safe-haven assets after Italians voted against a constitutional reform during Sunday’s referendum, resulting in the resignation of Prime Minister Matteo Renzi.

The benchmark 10-year bond yield, which moves inversely to its price, fell 1 basis point to 0.03 percent, the yield on long-term 30-year note also dipped 1 basis point to 0.59 percent and the yield on short-term 2-year note slid 1/2 basis point to -0.17 percent by 05:50 GMT.

Italian Prime Minister Matteo Renzi has resigned after suffering a heavy defeat in a referendum over his plan to reform the constitution. In a late-night news conference, he said he took responsibility for the outcome and said the No camp must now make clear proposals, reported BBC news.

With most ballots counted, the No vote leads with 60 percent against 40 percent for Yes. The turnout was nearly 70 percent, in a vote that was seen as a chance to register discontent with the prime minister, they added.

Moreover, Bank of Japan board member Makoto Sakurai in his last week’s speech to business leaders in the city of Otsuthe said that the Bank of Japan will continue to purchase massive amounts of government bonds even under its new policy framework targeting interest rates.

Lastly, investors will remain to focus on the upcoming third-quarter gross domestic product (GDP) data and 30-year JGB auction.

Meanwhile, the benchmark Nikkei 225 closed 0.82 percent lower at 18,725. While at 06:00 GMT, the FxWirePro's Hourly Japanese Yen Strength Index stood neutral at +94.93 (higher than +75 represents bullish trend).