JGB yields slump on rise in safe-haven demand ahead of Sino-U.S. trade deal, global uncertainties

The Japanese government bond yields slumped towards the end of Asian session Thursday, as investors’ risk appetite took a downturn ahead of a trade deal between the United States and China amid ongoing global economic and political uncertainties.

The yield on the benchmark 10-year JGB note, which moves inversely to its price, slumped nearly 2-1/2 basis points to -0.023 percent, the yield on the long-term 30-year hovered around 0.607 percent and the yield on short-term 2-year plunged 15 basis points to -0.149 percent by 05:30GMT.

Global risk appetite may take a breather as investors contemplate and digest US Trade Representative’s sobering remarks on a China trade deal that needs to include “significant structural changes” to China’s model and provisions to enforce that promises made are kept. He also cautioned that “the reality is this is a challenge that will go on for a long, long time”, OCBC Treasury Research reported.

Wall Street closed flat while the 10-year UST bond yield rose to 2.69 percent. Meanwhile, US President Donald Trump and North Korean leader Kim Jong Un sounded optimistic at the start of their second summit, with Trump opining that “I am certain that the great outcome…will be made”.

However, back in the US, the political drama continued with his former lawyer Michael Cohen’s testimony to a congressional hearing that portrayed Trump as racist, a con man and a cheat, but had no direct evidence of collusion with Russia. Elsewhere, the latest escalation in India-Pakistan tensions also provides a tone of caution, the report added.

Meanwhile, the Nikkei 225 index closely nearly 1 percent lower at 21,361.00 by 05:35GMT, while at 05:00GMT, the FxWirePro's Hourly JPY Strength Index remained slightly bearish at -83.39 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex