JGBs remain flat in thin trading, investors eye UK PM May’s speech

The Japanese government bonds traded nearly flat Tuesday as investors remain sidelined in any big deal as major market participants are eyeing to focus on the United Kingdom’s Prime Minister Theresa May’s speech scheduled later in the day for further guidance in the debt market.

We foresee that the bond prices will keep drifting between small gains and losses in quiet trading session.

The benchmark 10-year bond yield, which moves inversely to its price, hovered around 0.05 percent, the long-term 30-year bond yields stood flat at 0.74 percent and the yield on the 3-year note remained steady at -0.17 percent by 06:00 GMT.

Further, UK PM Theresa May's Brexit speech is scheduled to be held on Tuesday by 11:45 GMT. We expect that she will lay out plan to exit the European Union that would see Britain losing access to the bloc's single market.

The BoJ’s first two-day monetary policy meeting for 2017 will take place on January 30-31. We foresee that the central will remain committed to hold its 10-year JGB yields near zero, while keeping interest rate steady at -0.10 percent.

Lastly, in terms of recent economic data, Japan’s industrial production (IIP) growth remained unchanged in November, registering a consistent positive growth in last 5 months. The final IIP for November came at +1.5 percent m/m (flash was +1.5 percent m/m), from preliminary +1.5 percent in September.

Also, shipments climbed 1.0 percent m/m, slightly above the 0.9 percent growth reported earlier. Additionally, inventories fell 1.6 percent, from down -1.5 percent. On an annual basis, industrial production rose 4.6 percent in November, up from -1.4 percent in September.

Meanwhile, the benchmark Nikkei 225 traded 1.48 percent lower at 18,813, while at 6:00GMT, the FxWirePro's Hourly Yen Strength Index remained highly bullish at 165.17 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex