10-year JGB yields hit highest since January 2016 after BoJ disappoints in daily bond-buying operations

The 10-year Japanese government bond yields hit highest since January 2016 after the Bank of Japan (JPY) disappointed in its daily bond-buying operations. Also, members of the board remained optimistic over the country’s inflation and growth targets in its December meeting minutes released early today.

The benchmark 10-year bond yield, which moves inversely to its price, rose nearly 1 basis point to 0.11 percent, while the long-term 30-year bond yields jumped 4 basis points to 0.90 percent and the yield on the short-term 2-year note moved nearly 1-1/2 basis points higher at -0.20 percent by 06:20 GMT.

The central bank purchased JGBs Friday having residual maturity of up to 1 year worth JPY700 million, maturity of 5-10 years worth JPY4.504 billion, T-bills worth JPY10.003 billion.

Members of the BoJ’s monetary policy board believe that the country's economic recovery remains on a moderate recovery path, minutes revealed from the board's December 19-20 meeting showed today. Inflation expectations continue to be in a weakening phase, hampering the central bank's stated goal of ending deflation.

"Domestic demand is likely to follow an uptrend, with a virtuous cycle from income to spending being maintained in both the corporate and household sector," the minutes said.

Lastly, the central bank in its quarterly economic outlook report mentioned that the Japanese economy is likely to continue growing at a pace above its potential through the projection period, i.e., through FY2018 on the back of highly accommodative financial conditions and the effects of the government's large-scale stimulus measures, with the growth rates in overseas economies increasing moderately.

Meanwhile, Japan’s Nikkei 225 closed 0.03 percent higher at 18,918.20 while at 6:00GMT, the FxWirePro's Hourly Yen Strength Index remained neutral at 45.53 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex