JGBs gain despite jump in industrial production; investors eye 10-year auction

Japanese government bonds gained even as the country’s industrial output grew in December at the fastest pace in eight months, and up for a third straight month, in a sign that its humming factories have likely driven economic expansion for an eighth consecutive quarter. Investors will now remain focused to watch the 10-year auction, scheduled to be held on February 1 for further direction in the debt market.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1 basis point to 0.09 percent, the yield on the long-term 30-year note remained tad lower at 0.81 percent and the yield on short-term 2-year traded 1/2 basis point lower at -0.13 percent by 05:40 GMT.

Trade ministry data out on Wednesday showed factory output grew 2.7 percent in December from the previous month, handily beating economists’ median estimate of a 1.6 percent increase, following a 0.5 percent gain in November.

The gain was led by transport equipment, and general-purpose, production and business-oriented machinery. Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expect output to fall 4.3 percent in January and increase 5.7 percent in February, Reuters reported.

Meanwhile, the Nikkei 225 index fell 0.45 percent to 23,187.00 by 05:45 GMT, while at 05:00GMT, the FxWirePro's Hourly JPY Strength Index remained neutral at 9.38 (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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