JGBs jump at close following Fed’s 25bp rate cut, delivers hawkish tone

The Japanese government bonds jumped at close of Asian trading session Thursday following a 25bp rate cut by the Federal Reserve at its overnight monetary policy meeting, where it maintained a hawkish tone, with promise to 'act as appropriate' to sustain expansion.

At close, the yield on the benchmark 10-year JGB note, which moves inversely to its price, plunged 22 basis points to -0.221 percent, the yield on the long-term 30-year suffered 3-1/2 basis points to 0.299 percent and the yield on short-term 2-year slumped 30 basis points to -0.299 percent.

In addition to the rift between market-implieds and the dot plots with regards to further Fed rate cuts, market will now also have to address the potential policy gulf between the FOMC and the other major global central banks. On this front, look to forward guidance from the raft of central banks due today, OCBC Daily Market Outlook reported.

"In the near term, expect the EUR/USD to remain top heavy (pitting the ECB vs. the FOMC) while on other fronts, supportive US yields should continue to keep USD-JPY buoyant. Markets may lose visibility with regards to the AUD/USD but we reckon that a sustained top heavy posture for the pair may prevail given that the global macro prognosis remains hazy despite Powell’s relatively benign outlook for the US economy," the report further commented.

Meanwhile, the Nikkei 225 index closed tad 0.49 percent up at 22,068.00.