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JGBs trade mixed amid weak U.S. Treasuries, BoJ buys 200 billion of super-long bonds

The Japanese government bonds traded mixed Friday as short-term notes fell, following weakness in the U.S. Treasuries. On the other hand, long-term notes gained, after the Bank of Japan (BoJ) in its daily bond buying operations, purchased more of super-long bonds for the second time this week to control rising yields.

The benchmark 10-year bond yield, which moves inversely to its price, rose 2 basis points to 0.09 percent (highest since mid-February), the long-term 30-year bond yield fell 3 basis points to 0.70 percent and the yield on short-term 2-year note climbed 2 basis points to -0.17 percent by 06:30 GMT.

The JGBs have been closely following developments in the U.S. debt market. The benchmark 10-year bonds witnessed a heavy sell-off, pushing yields by 8-1/2 basis points to 2.60 percent (highest since September 2014).

The Federal Open Market Committee increased the fed funds rate to a 0.50-0.75 percent range, as widely expected. The statement noted that information received since the November meeting indicates that the labour market has continued to strengthen and that economic activity has been expanding at a moderate pace since mid-year.

Also, the new projections showed that the central bankers expect three quarter-point rate increases in 2017, up from the two seen in the previous forecasts in September, based on median estimates.

Today, the central bank purchased bonds worth 200 billion yen with maturity between 10-25 years again after Wednesday.

Lastly, the Bank of Japan’s last two-day monetary policy meeting will take place on December 19-20. We expect steady interest rate while maintaining an asset-buying program of 80 trillion yen a month till second-quarter of 2017.

Meanwhile, the benchmark Nikkei 225 closed 0.66 percent higher at 19.401.15. While at 06:00 GMT, the FxWirePro's Hourly Japanese Yen Strength Index stood neutral at -73.81 (lower than -75 represents bearish trend).

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