Japanese 10-Year Yield Climbs on Firm Oil Prices

Japanese 10-Year Yield Climbs on Firm Oil Prices

11 April 2016, 09:01
Roberto Jacobs

Japanese 10-Year Yield Climbs on Firm Oil Prices

The Japanese government debt instrument traded weak on Monday amid tracking strong cues emerging from crude oil prices. The Japanese bonds have been closely following developments in oil markets because of their impact on inflation expectations. The benchmark 10-year bonds yield, which is inversely proportional to bond price rose 2.56 pct to -0.076 pct and 3-year bonds yield jumped 0.84 pct to -0.237 pct 6:25 GMT. The JGB yields are up 0.5-1 bps from last Friday in the super-long zone.

Oil futures bounced off 1-month lows as Kuwait's OPEC governor and two sources said all signs suggested a meeting of oil-producing countries on April 17 would deliver an agreement to freeze output. Also, Oil prices rallied after industry data showed that U.S. stockpiles fell below the 9 million barrel per day mark last week for the first time since October 2014. The International benchmark Brent futures rose 0.21 pct to $42.02 and West Texas Intermediate (WTI) jumped 0.35 pct to $39.86 by 6:25 GMT.

Earlier, Japan February Machinery orders tumbled -9.2% m/m (consensus was for -12.0% m/m), from up 15.0% in January.

Moreover, the BoJ's adoption of negative rates in January has driven JGB yields below zero, while also increasing its market volatility.

We foresee that the JGBs will trade relatively flat as the BoJ did not offer to buy JGBs under its massive JGB purchase program, as expected. The BoJ is now widely expected to buy mid-term JGBs on Wednesday and super-long JGBs on Friday.

Further, 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 pct at year-end.

The material has been provided by InstaForex Company - www.instaforex.com

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