JGBs edge slightly higher on BoJ’s daily market operation; FOMC decision in focus

Japanese government bonds edged higher on Wednesday following daily debt buying operation conducted by the Bank of Japan ahead of the FOMC last monetary policy decision later in the day.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell 1/2 basis point to 0.045 percent, the yield on long-term 40-year declined nearly 1/2 basis point to 0.967 percent and the yield on short-term 3-year declined 1 basis point to -0.141 percent by 02:50 GMT.

Today, the BoJ in its daily market operation offered to buy 410 billion yen of JGBs maturing in 5 to 10 years, 300 billion yen of JGBs maturing in three to five years, and 250 billion yen below 3 years.

The U.S. Treasury curve saw the mixed performance on Tuesday during a relatively quiet session as markets await the December FOMC statement on Wednesday. However, it helps to add a greater focus on the November CPI release on Wednesday, expected to show maintained support on a y/y basis for both headline and core readings.

Beyond the December meeting, we expect there to be increased debate over the timing of future rate increases in 2018 as leadership at the Fed becomes more established. Hence, we expect forward guidance to be more muted (particularly during Fed Chair Yellen's post-statement press conference).

Lastly, the market will also look forward to the October’s industrial production and Q4 Tankan large manufacturer’s index.

Meanwhile, Japan’s Nikkei 225 slumped 0.10 percent to 22,844.00 by 03:00, while at 04:00GMT, the FxWirePro's Hourly Yen Strength Index remained neutral at 37.68 (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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