JGBs disappoint as investors await 30-year auction

The Japanese government bonds disappointed Tuesday as investors remained cautious ahead of the 30-year auction, scheduled to be held on July 6. Also, the 10-year auction, held earlier today failed to spur demand for safe-haven assets, leading to further sluggishness in the bond prices.

The benchmark 10-year bond yield, which moves inversely to its price, rose nearly 1 basis point to 0.06 percent, the long-term 30-year bond yields hovered around 0.82 percent and the yield on the short-term 2-year note traded nearly 1/2 basis point higher at -0.12 percent by 06:10 GMT.

The BoJ has become more upbeat about growth prospects in recent months. The latest Statement on Monetary Policy dropped the reference to the sluggish performance of emerging markets and has also become more positive on private consumption. That said, the BoJ remains wary about inflation. This is not surprising, given that inflation remains a long way from its 2 percent target and also its view that "inflation expectations have remained in a weakening phase".

"We maintain our view that the central bank’s strategy to target both the quantity and price of money simultaneously is inconsistent. We estimate that if the BoJ were to continue buying at the current (average) monthly pace this year it would purchase JPY70trn of JGBs in 2017, which is short of its target,"

Meanwhile, Japan’s Nikkei 225 closed 0.12 percent lower at 20,032.35, while at 06:00GMT and the FxWirePro's Hourly Yen Strength Index remained neutral at 1.95 (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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