Japanese bonds plunge as Nikkei rises to three months closing high

The Japanese government bonds plunged Thursday as investors moved away from safe-haven buying after Japanese stocks edged up to three-month closing highs.

The benchmark 10-year bond yield, which moves inversely to its price, rose more than 1-1/2 basis points to -0.051 percent, the super-long 30-year JGB yield climbed 2 basis points to 0.447 percent, the 5-year JGB yield also bounced 2 basis points to -0.157 percent and the short-term 2-year JGB yield increased 1 basis point to -0.183 percent by 08:30 GMT.

According to Reuters, Japanese government bonds prices slipped with 20-year bonds yield hitting a four-month high partly on speculation that the Bank of Japan may tweak its policy to effectively steepen the yield curve.

The long-term Japanese government bonds continued to trade lower after the Federal Reserve Chair Janet Yellen at the annual Jackson Hole Symposium signalled that the possibilities of increasing policy rates have strengthened in recent months.

Moreover, the Bank of Japan governor Kuroda while speaking at Jackson Hole hinted at negative-rate bias and said that the central bank will continue to carefully examine risks and take additional easing measures without hesitation. He said that there is a possibility that long-term inflation expectations are yet to be anchored in Japan.

Kuroda said he felt that between quantitative easing and negative interest rates the BoJ had an "extremely powerful policy scheme" and "will act decisively as the bank moves on in order to raise inflation to 2 percent.

According to recent Reuters poll, 60 percent of economists see the Bank of Japan easing in September; 40 percent see them stay unchanged. Pollsters are split on possible policy action and over 50 percent said the BoJ will adopt more flexible wording on inflation targeting.

In terms of recent economic data release, Japan’s August final Nikkei manufacturing PMI slightly rose to 49.5 from 49.3 in July.

Moreover, investors await the Friday's US jobs data as it could be used to anticipate the Fed's most likely step to raise the interest rate.

Meanwhile, the benchmark Nikkei 225 closed up 0.23 percent at 16,926.84 and the broader Topix index also closed 0.59 percent higher to 1,337.38 points.