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JGBs trade mixed on disparate economic data; long-term yields climb as BoJ lowers debt buying

The Japanese government bonds traded mixed Friday as investors were digesting a disparate bag of economic data. Also, long-term debt slumped after the Bank of Japan said that it will lower its buying of JGBs with 5 to 10 years of maturity to 410 billion yen.

The benchmark 10-year bond yield, which moves inversely to its price, rose 1/2 basis point to -0.078 percent, the yield on long-term 30-year note climbed 2 basis points to 0.468 percent and the yield on short-term 2-year note slid 1-1/2 basis points to -0.277 percent by 07:00 GMT.

Japan’s national consumer inflation fell 0.5 percent on year in August, matching expectations following the 0.4 percent decline in July. The core CPI, which excludes food prices, also was dipped 0.5 percent, trending in line with expectations and unchanged from the previous month. Additionally, Japanese household spending fell 4.6 percent in August from a year earlier in price-adjusted real terms, showed a sign of persistent weakness in private consumption.

On the other hand, Japan's industrial output in August rose a seasonally adjusted 1.5 percent from the previous month, lifted by the electronics parts and devices sector.

Moreover, the Bank of Japan said that it lower it's buying of JGBs with 5-10 years of maturity to 410 billion (nearly 4.05 billion U.S. dollar) from 430 billion yen at an operation earlier this week. The central bank decided at its policy meeting last week to keep the 10-year JGB yield around zero percent, and reducing the amount of debt it buys at its regular operations is one way it could achieve that goal.

In addition, the JGBs have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Bank of Japan's target. Crude oil prices dropped as investors cashed in profit after relishing 7 percent of gain in the past two sessions after OPEC confirmed that the group has struck a deal to lower crude output at its policy meeting in November. The International benchmark Brent futures fell 1.14 percent to $49.23 and West Texas Intermediate (WTI) also tumbled 1.09 percent to $47.31 at 07:10 GMT.

Meanwhile, the benchmark Nikkei 225 closed down 1.46 percent at 16,449.84 and the broader Topix index closed 1.52 percent lower to 1,322.78 points.

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