JGBs surge tracking U.S. Treasuries on renewed trade tensions; equities reflect risk aversion

The Japanese government bonds surged at the end of Asian session Friday tracking a similar movement in the United States Treasuries, after President Donald Trump dropped the bombshell that he would not meet with Chinese leader Xi Jinping before the March 1 deadline for the 90-day trade truce.

This left markets in risk-off territory as the spectre of US raising tariffs to 25 percent then came back into play, weighing heavily on the performance of the equity market, as investors started to switch positions to risk-haven assets.

Gold, a safe-haven instrument in the financial markets, is holding well above the $1,300/oz level, despite rally in the U.S. dollar.

The yield on the benchmark 10-year JGB note, which moves inversely to its price, slumped nearly 3 basis points to -0.028 percent, the yield on the long-term 30-year fell 2 basis points to 0.591 percent and the yield on short-term 2-year plunged 16-1/2 basis points to -0.164 percent by 06:00GMT.

In addition, a weak global outlook, further dampened investors’ risk sentiments – Federal Reserve Governor Jerome Powell, in his speech on Wednesday, said that sluggish productivity and a widening wealth gap are the biggest risks to the U.S. economy.

According to a report from CNBC, the European Commission has also revised downward its growth outlook for the euro zone this year as global trade tensions and among headwinds undermine the bloc's largest economies. The Commission sees euro zone growth slowing to 1.3 percent this year from 1.9 percent in 2018.

Meanwhile, the Nikkei 225 index closed nearly 2 percent lower at 20,341.00, while at 06:00GMT, the FxWirePro's Hourly JPY Strength Index remained neutral at 63.90 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex