JGBs weaken following U.S. Treasuries, economic growth optimism

The Japanese government bonds traded weak Thursday, tracking U.S. Treasuries and on account of reports citing moods of economic growth optimism. Also, investors remain keen to watch the December consumer price inflation, scheduled for release next week and the month-end monetary policy meeting of the Bank of Japan.

The benchmark 10-year bond yield, which moves inversely to its price, rose 2 basis points to 0.07 percent, the long-term 30-year bond yields jumped 3 basis points to 0.76 percent and the yield on the short-term 2-year note remained rose nearly 1/2 basis point to -0.22 percent by 06:45 GMT.

The United States debt market witnessed weak sell-off and aggressive swap paying pushed JGB yields higher at open. Also, poor 5-year bond auction kept yields move out of the 0.05 percent zone, after a long period of time.

The JGBs have been closely following developments in the U.S. debt market. The U.S. benchmark 10-year bond yields jumped 8 basis points to 2.41 percent, from yesterday’s low of 2.33 percent.

According to a report from the Japanese press, the central bank is expected to upgrade its assessment of the economy, with higher forecasts of growth and inflation, following upbeat recovery in domestic consumption and higher disposable household income.

The BoJ’s first two-day monetary policy meeting for 2017 will take place on January 30-31. We foresee that the central will remain committed to hold its 10-year JGB yields near zero, while keeping interest rate steady at -0.10 percent.

Meanwhile, the benchmark Nikkei 225 traded 0.92 percent higher at 19,068, while at 6:00GMT, the FxWirePro's Hourly Yen Strength Index remained highly bearish at -111.55 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex