JGBs suffer despite hopes of worsening August trade balance; BoJ’s policy decision in focus

Japanese government bond prices suffered during late Asian session Tuesday even as market participants expect to see a worse trade balance data for the month of August, scheduled to be released today by 23:50GMT. Also, the Bank of Japan’s (BoJ) 2-day bi-monthly monetary policy meeting is due to be concluded on September 19 which will add further direction to the debt market.

The country’s trade balance is foreseen to come in at -JPY469 billion, compared to a deficit of -JPY232 billion in July. While exports are seen to rise 5.6 percent from prior 3.9 percent, imports are expected to jump a whopping 14.9 percent, from July 14.6 percent.

The yield on the benchmark 10-year JGB note, which moves inversely to its price, remained 1/2 basis point higher at 0.115 percent, the yield on the long-term 30-year note climbed 1 basis point to 0.851 percent while the yield on short-term 2-year traded flat at -0.108 percent by 05:00GMT.

According to a report from FxStreet, citing Barclays Research, "We expect the BoJ to retain current policy, with the market still digesting its July decision and the ruling LDP presidential election to be held the next day. However, we expect it to allow more fluctuation around targeted long-term yields (stealth normalization) in April 2019 with risks skewed toward an earlier move".

Further, the central bank’s 9-member policy board is expected to analyse market movements since its policy decision in July to allow bond yields to move more flexibly around its zero percent target, Reuters reported.

Meanwhile, the Nikkei 225 index jumped 1.56 percent to 23,461.50 by 05:10GMT, while at 05:00GMT, the FxWirePro's Hourly JPY Strength Index remained highly bearish at -111.965 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex