JGBs mixed as referendum voting begins in UK, polls say outcome too close to call

The Japanese government bonds traded mixed on Thursday as millions of Britons begin voting in historic EU referendum for the second time after 1975 referendum. Also, the recent polls showed the outcome of the referendum is expected to be too close to call.

The yield on the benchmark 10-year bonds, which moves inversely to its price rose nearly 1 basis point to -1.130 percent, yield on super-long 40-year bonds dipped more than 2 basis points to 0.271 percent and the short-term 2-year JGB yield bounded 1/2 basis point to -0.233 percent by 06:40 GMT.

Referendum voting has officially begun in the United Kingdom at 6:00 GMT, about half an hour ago. Voting will continue for next 15 hours and will end at 21:00 GMT with the result likely known around this time tomorrow (0600GMT-0700GMT). The market is not likely to move much throughout this period, however, there could occasional volatility spark due to low volume and position shifting. Interestingly, in 1975 PM Harold Wilson called a referendum for the first time after considerable opposition rose from within the country on UK staying with the European Economic Community, the precursor of the EU. But, with 67 percent of the voters voted to remain in the EU, U.K. stayed in 1975 referendum.

Latest online poll by YouGov showed 51 percent has voted in favour of 'Bremain', while remaining 49 percent voted for a 'Brexit'. Also, poll by the YouGov, 35 percent say its 'risky' to stay in the European Union, while 53 percent say it is 'safe' to stay in the EU.

Another UK phone poll by ComRes indicated 48 percent Britons voted to 'Remain' in the European Union, while 42 percent voted for 'Leave'; rest remained undecided.

Interestingly, according to Betfair the probability of the Remain camp winning in today's UK referendum has increased by 78 percent, according to response from the latest campaign polls.

On the other hand, last-minute UK poll from TNS showed 43 percent favouring Leave and 41 percent Remain and a new UK (online) poll by Opinium showed 45 percnet favouring leaving the EU and 44 percent in favour of remaining. This represents a shift to a pro-Brexit balance from pro-EU balances previously.

In addition, the Bank of Japan’s minutes of the April meeting, released Tuesday showcased that some members are worried over the Japanese economy and believe that overseas economies continue to pose downside risks to Japan's economy and prices.

At the meeting which was held on April 27-28, the BoJ held off on expanding monetary stimulus even as global headwinds, a strong yen and soft consumption threatened to derail Japan's fragile economic recovery. A few members remained more cautious on the outlook for Japanese inflation trend.

The meeting outlined the need to consider more flexible JGB purchases and few members also said that negative rates impair JGB markets stability, financial market function. One member said the CB's decision to keep policy on hold at the April meeting should not be seen as the central bank changing its thinking on monetary policy, suggesting the member wished to avoid giving an impression the BoJ had become reluctant to ease. But overall, members were sanguine despite lowering their consumer price forecasts, saying they could keep policy on hold because it would take time to see the benefits, Reuters reported.

Lastly, the BoJ is not expected to buy JGBs under its massive JGB purchase program, as the MoF conducts a monthly 1.1 trillion yen 20-year JGB auction. The Ministry of Finance offered 1.1 trillion yen ($10.51 billion) of 20-year JGBs with a 0.20 percent coupon. The notes sold at a lowest price of 99.50, and drew bids of 3.61 times the amount offered, above the previous sale's bid-to-cover ratio of 3.36 times.

Meanwhile, the benchmark Nikkei 225 index closed up +1.07 percent at 16,238.35, and the broader Topix index closed higher 1.10 percent to 1,298.71 points.