Japanese bonds trade tad higher ahead of BoJ's policy decision; 10-year yields down over 1/2 bp

Japanese bonds traded a little higher Monday as investors awaited the Bank of Japan’s second last two-day monetary policy meeting scheduled to held October 30-31. Also, the bond yields fell following firmness in the U.S. Treasuries.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell nearly 1 basis point to 0.065 percent, the yield on long-term 30-year declined nearly ½ basis point to 0.873 percent and the yield on short-term 2-year slid ½ basis points to -0.153 percent by 04:00 GMT.

The BoJ is widely expected to keep its policy-setting unchanged as inflation and growth hoverers below the central bank target range. According to the Bloomberg survey, economists expect the BoJ to hold its short-term rate at -0.1 percent and target for the 10-year Japanese government bond yield at around zero percent and likely to keep its purchases of exchange-traded funds and real estate investment trusts unchanged.

Board member Goushi Kataoka may dissent again; he dissented at the last meeting, saying the effects of the current stimulus weren't strong enough to meet the inflation target. There's a chance he will propose additional stimulus.

Moreover, the U.S. Treasuries pushed higher across the curve driven higher early on following increased speculation that President Trump is leaning in the direction of appointing Fed Governor Powell as the replacement to current Fed Chair Yellen, a less hawkish consideration is following recent concerns that he was/is seriously considering John Taylor.

The U.S. 10-year Treasury yields fell 3 basis points to 2.405 despite Friday's higher-than-expected preliminary third-quarter GDP figure. In addition, the short-term 2-year bond yields declined 1 basis point to 1.595.

Apart from the BoJ's policy decision, markets now look ahead to the November FOMC statement on Wednesday, in which it is widely expected to deliver no change in the overnight rate.

Meanwhile, Japan’s Nikkei 225 traded flat at 22,003 by 04:15, while at 04:00GMT, the FxWirePro's Hourly Yen Strength Index remained slightly bullish at 77.29 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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