JGBs continue to face pressure ahead of 30-year auction

The Japanese government bonds disappointed Wednesday as investors remained cautious ahead of the 30-year auction, scheduled to be held on July 6. Also, the surge in the country’s services PMI, with growth in the sector climbing to a 22-month high, added to the disappointment in safe-haven trading.

The benchmark 10-year bond yield, which moves inversely to its price, rose 1/2 basis point to 0.08 percent, the long-term 30-year bond yields climbed 1 basis point to 0.87 percent and the yield on the short-term 2-year note also traded nearly 1 basis point higher at -0.11 percent by 06:30 GMT.

The headline seasonally adjusted Business Activity Index edged up to 53.3 in June, from 53.0 in May. The latest reading was the highest in nearly two years and pointed to a solid rise in service sector activity. It also continued the trend of accelerating growth, which has been noted throughout the second quarter.

Despite the slower growth of Japanese manufacturing production, the Nikkei Composite Output Index signalled a solid expansion at 52.9 in June, down only slightly from 53.4 in May.

"With both manufacturers and service providers continuing to hire at solid rates, the omens are good for further growth in the rest of 2017," said Paul Smith, Senior Economist at IHS Markit.

Meanwhile, Japan’s Nikkei 225 closed 0.16 percent higher at 20,064.00, while at 06:00GMT and the FxWirePro's Hourly Yen Strength Index remained highly bearish at -101.32 (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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