JGBs trade narrowly mixed ahead of 10-year auction

The Japanese government bonds traded narrowly mixed Wednesday ahead of the 10-year auction, scheduled to be held on February 2. Also, investors remain sidelined in any major trading activity, following closure of few Asian markets on account of Lunar New Year holidays.

The benchmark 10-year bond yield, which moves inversely to its price, inched nearly 1 basis point higher to 0.09 percent, while the long-term 30-year bond yields hovered around 0.83 percent and the yield on the short-term 2-year note slumped 2 basis points to -0.22 percent by 06:30 GMT.

The central bank purchased JGBs Tuesday having residual maturity of 1-3 years worth JPY4 billion, maturity of 3-5 years worth JPY4.205 billion, more than 10-25 years worth JPY1.910 billion, maturity of over 25 years worth JPY1.105 billion.

At the Monetary Policy Meeting held today, the Policy Board of the BoJ decided to keep its short-term policy interest rate at -0.10 percent, while purchasing Japanese government bonds (JGBs) so that 10-year JGB yields remain at around zero percent mark.

Further, the central bank in its quarterly economic outlook report mentioned that the Japanese economy is likely to continue growing at a pace above its potential through the projection period, i.e., through FY2018 on the back of highly accommodative financial conditions and the effects of the government's large-scale stimulus measures, with the growth rates in overseas economies increasing moderately.

Also, the central bank revised up its estimate of Japan’s real gross domestic product (GDP) to +1.5 percent for FY2017/18, compared to +1.3 percent projected in November, for FY2018/19 at +1.1 percent, against the +0.9 percent projected in November.

Meanwhile, Japan’s Nikkei 225 closed 0.50 percent higher at 19,136 while at 6:00GMT, the FxWirePro's Hourly Yen Strength Index remained highly bullish at 135.49 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex