JGBs close higher despite better-than-expected Q1 GDP; eyes on super-long 3-year auction

The Japanese government bonds closed higher on the first trading day of the week Monday after investors have largely shrugged-off the better-than-expected rise in the country’s gross domestic product (GDP) for the first quarter of this year, released late yesterday, while markets still eye the super-long 30-year auction, scheduled to be held on June 13 by 03:35GMT for further direction in the debt market.

At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, slipped 1 basis point to -0.122 percent, the yield on the long-term 30-year slumped nearly 2-1/2 basis points to 0.373 percent and the yield on short-term 2-year plunged 19-1/2 basis points to -0.194 percent.

Both US stocks and bonds rallied on Friday on the back of heightening expectations of a “Powell Put”, fuelled by weak May US job data. Yield on 10-year US Treasury touched a low of 2.053 percent, the lowest since September 2017, OCBC Treasury Research reported.

Market has priced in a rate cut as early as July. On the trade tension front, the US announced that it will suspend the threat of tariffs on Mexico “indefinitely” after both sides reached a signed agreement on immigration issues, sending the S&P futures higher this morning, the report added.

Meanwhile, the Nikkei 225 index closed 1.12 percent higher at 21,118.50, while at 06:00GMT, the FxWirePro's Hourly JPY Strength Index remained highly bearish at -174.24 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex