Japanese bonds plunge on expectations of thriving U.S. jobs data

The Japanese government bonds plunged Friday as investors moved away from safe-haven buying on expectations of higher United States non-farm payroll result. Also, some regular buyers remained cautious on BoJ’s bonds buying programme.

The benchmark 10-year bond yield, which moves inversely to its price, rose nearly 2 basis points to -0.019 percent, the super-long 30-year JGB yield climbed 8 basis points to 0.524 percent, the 5-year JGB yield also bounced 1 basis point to -0.147 percent and the short-term 2-year JGB yield increased 1/2 basis point to -0.178 percent by 08:30 GMT.

Market now wait for the Friday's US jobs data as it could be used to anticipate the Fed's most likely step to raise the interest rate. The August Labour Department employment situation report will be released on Friday at 12:30 GMT.

We foresee that the overall non-farm payrolls will increase +180k in August, higher than the market expectations of +175k increase, as compared to the +255k reading seen in July, alongside a decrease in the unemployment rate to 4.8 percent, in the line of market expectations for 4.8 percent result, from previous 4.9 percent.

Moreover, the BOJ refrained from buying any longer maturities in its asset purchase programme. It offered to buy 400 billion yen of 1- to 3-year JGBs, 420 billion yen of 3- to 5-year JGBs, and 430 billion yen of 5- to 10-year JGBs, Reuters reported.

According to recent Reuters poll, 60 percent of economists see the Bank of Japan easing on September 21; 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.

Meanwhile, the benchmark Nikkei 225 closed down 0.01 percent at 16,925.68 and the broader Topix index also closed 0.25 percent higher to 1,340.76 points.