JGBs sharply rebound on safe-haven demand following worries over snap election

The Japanese government bonds sharply rebounded on the last trading day of the week, as investors poured into safe-haven instruments, following worries over the upcoming snap election, called by Prime Minister Shinzo Abe.

The yield on the benchmark 10-year Treasury note, which moves inversely to its price, slipped 1 basis point to 0.06 percent, the yield on long-term 30-year fell nearly 1-1/2 basis points to 0.87 percent and the yield on short-term 2-year traded 1/2 basis point lower at -0.11 percent by 03:50 GMT.

Premiums on credit default swaps on Japanese government bonds have soared to a roughly 14-month high, indicating investors perceive a greater risk to holding JGBs. Long-term interest rates climbed to around a two-month high Thursday when Prime Minister Shinzo Abe moved to dissolve the lower house for an election, Nikkei reported.

The prime minister wants to put part of the income originally earmarked for repaying debt toward programs such as free early childhood education. He has also walked back a goal of achieving a primary budget surplus -- a measure that excludes debt-servicing costs -- by fiscal 2020, saying it would be difficult to reach.

Meanwhile, Japan’s Nikkei 225 traded 0.20 percent lower at 20,322.00 by 03:55GMT, while at 03:00GMT, the FxWirePro's Hourly Yen Strength Index remained highly bearish at -111.35 (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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