JGBs slide tracking weakness in U.S. Treasuries; strong demand at 10-year auction limits downfall

The Japanese government bonds slid Thursday, tracking weakness in U.S. Treasuries; however, strong demand at the 10-year auction held earlier today has cushioned a steeper fall in bond prices. Further, expectations of a rise in January consumer price inflation (CPI) also weighed on bond prices.

The benchmark 10-year bond yield, which moves inversely to its price, rose nearly 1 basis point to 0.06 percent, the long-term 30-year bond yields jumped nearly 3-1/2 basis points to 0.87 percent and the yield on the short-term 3-year note traded nearly 1/2 basis point higher at -0.17 percent by 05:50 GMT.

At the Ministry of Finance's sale of JPY2.4 trillion (USD21.1 billion) of 10-year JGBs with a 0.1 percent coupon, some 49.6521 percent of the bids were accepted at the lowest price of 100.13.

Further, the sale drew bids of 3.74 times the amount offered, up  from the previous sale's bid-to-cover ratio of 3.62 times, suggesting stronger demand for the bonds. The tail between the average and lowest accepted prices came in at 0.04, nearly matching that of last month's offering at 0.05

Lastly, the investors will also be focussing on the January unemployment rate, which is anticipated to decline, for further direction in the bond market.

Meanwhile, Japan’s Nikkei 225 rose 0.93 percent to 19,574 at 06:10GMT, while at 06:00GMT, the FxWirePro's Hourly Yen Strength Index remained highly bearish at -136.78 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex