JGBs tad higher despite better-than-expected Q2 GDP; capital expenditure remains robust

Japanese government bonds remained tad higher on the last trading day of the week as investors have largely shrugged-off the better-than-expected gross domestic product (GDP) for the second quarter of this year, released late yesterday. In addition, the capital expenditure component of the GDP also remained robust, again beating consensus estimates.

The yield on the benchmark 10-year JGB note, which moves inversely to its price, slipped 1/2 basis point to 0.109 percent, the yield on the long-term 30-year note traded flat at 0.858 percent and the yield on short-term 2-year also slipped 1/2 basis point to -0.112 percent by 05:00 GMT.

According to a report from the Nikkei Asian Review, the Japanese economy witnessed a recovery in domestic growth during the Q2, after having suffered in the first three months of this year, owing to an upswing in household spending and rise in corporate investment.

As per the preliminary figures released by Japan’s Cabinet Office on late Thursday, economic growth expanded an annualized 1.9 percent growth in the April-June quarter, beating the 1.4 percent median estimate among analysts polled by Reuters and from prior -0.2 percent.

Further, the country’s capital expenditure also rose by 1.3 percent as companies have engaged more actively into labour-saving technologies, in an attempt to fight the tight labour market. The ongoing trade battle between the U.S. and China may further dent investors’ risk sentiments, in turn, leading to a loss in global economic growth.

Meanwhile, the Nikkei 225 index traded 0.76 percent lower at 22,426.50 by 05:10 GMT, while at 05:00GMT, the FxWirePro's Hourly JPY Strength Index remained highly bullish at 171.34 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex