Yields on 10-year JGB hit BoJ’s zero pct target first time since September as Fed Dec rate hike probability jumps to 92 pct

The Japanese 10-year bond yields hit the Bank of Japan’s zero percent target for the first time since September as the probability of a December rate hike by the Federal Reserve jumped to 92 percent from previous 30 percent before the presidential election.

The benchmark 10-year bond yield, which moves inversely to its price, rose more than 1 basis point to 0.00 percent, the yield on long-term 30-year note climbed 1-1/2 basis points to 0.566 percent and the yield on short-term 2-year note jumped 1-1/2 basis points to -0.199 percent by 06:40 GMT.

The JGBs have been closely following developments in the U.S. debt market. The United States benchmark 10-year Treasury yield bounced to 2.22 percent for the first time in 2016.

Also, 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 92 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.

Moreover, 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.

Meanwhile, the benchmark Nikkei 225 closes down -0.03 percent at 17,668.15 on profit taking (Nikkei jumped around 9 percent since the US election result) and the broader Topix index closed 0.21 percent higher to 1,402.98 points.

While at 06:00 GMT, the FxWirePro's Hourly Japanese Yen Strength Index remained highly bearish at -141.82 (lower than -75 represents bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex