The Japanese government bonds traded modestly lower Tuesday, succumbing to thin trading activity during a relatively quiet session that saw little data of much significance. Moreover, future course in bond prices are likely to be ruled by the movements in the crude oil market.
The yield on the benchmark 10-year bonds, which moves inversely to its price, rose nearly 1 basis point to -0.059 percent and the yield on short-term 2-year bonds climbed ½ basis point to -0.266 percent by 05:50 GMT.
The Japanese bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Bank of Japan's target. Crude oil prices decline following rise in Iranian exports that adds to a global oversupplied market, but a OPEC agreement on production cut offered some support. The International benchmark Brent futures fell 0.45 percent to $50.66 and West Texas Intermediate (WTI) dipped 0.51 percent to $48.56 by 06:00 GMT.
Moreover, Bank of Japan Governor Haruhiko Kuroda said that the bank still has a lot of room left to ease policy. On the other hand, Bank of Japan ex-board member Nobuyuki Nakahara to aide Japanese PM Abe said that the BoJ's yield curve control and negative rates are mistakes. He added that the central bank Governor Kuroda has ruined his chance of a second term.
In addition, the Bank of Japan said last week that it lower it's buying of JGBs with 5-10 years of maturity to 410 billion (nearly 4.05 billion U.S. dollar) from 430 billion yen at an operation earlier this week. The central bank decided at its policy meeting last week to keep the 10-year JGB yield around zero percent, and reducing the amount of debt it buys at its regular operations is one way it could achieve that goal.
Meanwhile, the benchmark Nikkei 225 closed up 0.83 percent at 16,735.65 and the broader Topix index closed 0.71 percent higher to 1,340.21 points.
