JGB yields decline on safe-haven demand after disparity heightens over possible Fed Chair successor

The Japanese government bond yields declined Wednesday as investors poured into safe-haven assets, following heightened disparity over the possible selection of Fed Chair after serving head Janet Yellen steps down.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slumped 2 basis points to 0.06 percent, the yield on long-term 30-year slipped nearly 1 basis point to 0.87 percent and the yield on short-term 2-year traded 1 basis point lower at -0.12 percent by 03:25 GMT.

Kevin Warsh is the front-runner for Fed chairman, and he is seen as someone who could oversee a dramatic revamp of the institution. Warsh would appeal to President Trump for a number of reasons, including that the former Fed governor and Wall Street banker would favor less regulation of the financial sector. Warsh also has family ties to the president but analysts say he would defend the Fed's independence.

As chairman, Warsh would most likely favor less regulation of the banking system, something President Donald Trump favors. From a policy standpoint, he may de-emphasize the Fed's reliance on its inflation target as a guide for interest rate hikes, something that's been frustrating for the Fed and periodically perplexing for markets.

He also is expected to be slightly more aggressive about interest rate hikes than Fed Chair Janet Yellen and could encourage a more rapid unwinding of the massive Fed balance sheet, which it has only begun to whittle back.

Meanwhile, Japan’s Nikkei 225 rose 0.28 percent to 20,672.00 by 03:50GMT, while at 03:00GMT, the FxWirePro's Hourly Yen Strength Index remained neutral at 62.35 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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