Yield on 10-year JGB approaches BoJ’s target zero pct mark following weakness in U.S. treasuries

The Japanese government bonds plunged Monday following weakness in the U.S. Treasuries.

The benchmark 10-year bond yield, which moves inversely to its price, rose more than 1 basis point to -0.01 percent (highest since September), the yield on long-term 30-year note climbed nearly 1-1/2 basis points to 0.548 percent and the yield on short-term 2-year note jumped 1-1/2 basis points to -0.230 percent by 07:00 GMT.

The Japanese bonds have been closely following developments in the U.S. debt market. The United States benchmark 10-year Treasury yield bounced 10 basis points to 2.219 percent for the first time in 2016.

Also, the economic growth of Japan during the third quarter of this year unexpectedly rose, largely beating expectations, following strong recovery in the country’s outbound shipments. However, weak consumer and household spending continued to exert downward pressure on the country’s near-term growth prospects.

Japan’s gross domestic product (GDP) expanded by an annualized 2.2 percent, data released by the Cabinet Office showed Monday, compared to a median estimate of economists for +0.8 percent. Exports grew 2.0 percent, the fastest gain in a year, but the increase was driven by potentially one-off factors such as a boost in shipments of smartphone parts.

A heavy sell-off in government bonds was supported by rising expectations that the U.S. President-elect Donald Trump's policies, such as fiscal expansion and protectionism on international trade, could support growth and inflation.

Last week, the United States Republican candidate Donald Trump pinned his victory against Democrat opponent Hillary Clinton in the 2016 presidential election. Investors again revised the outlook for US interest rates after Donald Trump's victory, with the probability of a December rate hike by the Federal Reserve going from as low as 30 percent to as high as 84 percent.

Also, the fall in the number of people opting for unemployment benefits in the United States has strengthened the probability of a December interest rate hike by the Federal Reserve.

Meanwhile, the benchmark Nikkei 225 closes up 1.71 percent at 17,672.62 and the broader Topix index closed 1.58 percent higher to 1,400 points. While at 07:00 GMT, the FxWirePro's Hourly Japanese Yen Strength Index stood neutral at -49.05 (lower than -75 represents bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex