Japanese Long-Term Bonds fall on Strong Labour Cash Earnings Report
The Japanese long-term bonds slumped on Tuesday after strong labor cash earnings report, which reduces the probability of further BOJ easing in the near term. The benchmark 10-year bonds yield, which is inversely propositional to bond price rose 18.75 pct to-0.065 pct and 40-year bonds yield jumped 1.90 pct to 0.429 pct at 6:30 GMT.
The Japan February labour cash earnings rose to +0.9% y/y (consensus was for +0.2%) from 0.4% in January.
Bank of Japan Governor Kuroda said that it is still halfway to inflation target and labor market is improving. He further added that corporate profits are high and drop in the price of oil is the main reason that haven't hit inflation target.
Japan’s Ministry of Finance sells 2.185 trillion yen of 0.1% 10-year bonds with the lowest price at 101.65, yielding minus 0.0640%, which was slightly higher than street forecasts. The bid-to-offer ratio improved from the last auction to 3.89 from 3.20, while the tail was at 0.05 versus 0.09 at the last tender.
Apart from this, global funds constituted the biggest investor class for Japan’s Treasury bills in the 4-quarter, with the ownership at a record high of 49%, according to the latest data from the central bank, as the Bank of Japan’s unprecedented monetary easing reduced yen funding costs. The BOJ also bought these securities as part of its effort to end the nation’s deflation through an increased supply of money, leaving the central bank as the second-biggest owner of T-bills.
Moreover, the BoJ's adoption of negative rates in January has driven JGB yields below zero, while also increasing its market volatility.
We expect an expansion of stimulus, and if the market happens to rule out any additional boost in stimulus, that would create an opportunity to go long and we also foresee that the 10-year note will yield about -0.15 percent at year-end.
The material has been provided by InstaForex Company - www.instaforex.com
