JGBs trade slightly lower following timid liquid-enhancing auction

The Japanese government bonds trended slightly lower Thursday, as investors remained sideline in any major deal amid a subdued trading session that witnessed data of little economic significance. Also, a subdued liquidity-enhancing auction dented investor sentiment, with the market also continuing to feel pressure from the recent retreat by U.S. Treasuries.

The benchmark 10-year bond yield, which moves inversely to its price, hovered around 0.09 percent, the long-term 30-year bond yields rose over 1 basis point to 0.90 percent and the yield on the short-term 3-year note also traded 1/2 basis point higher at -0.15 percent by 06:50 GMT.

An auction by the Ministry of Finance to sell JPY400 billion (USD3.51 billion) of off-the-run JGBs, intended to enhance market liquidity, further drawing tepid demand.

"Ongoing gains in the labor market have been accompanied by a further moderate expansion in economic activity. U.S. real gross domestic product is estimated to have risen 1.9 percent last year, the same as in 2015. Consumer spending has continued to rise at a healthy pace, supported by steady income gains, increases in the value of households’ financial assets and homes, favorable levels of consumer sentiment, and low-interest rates," Yellen said in her prepared testimony.

Lastly, the central bank on Wednesday purchased JGBs having residual maturity of 1-3 years worth JPY4.003 billion, maturity of 3-5 years worth JPY4.203 billion and those having maturities of 5-10 years worth JPY4.501 billion.

Meanwhile, Japan’s Nikkei 225 fell 0.47 percent to 19,347.53 at the time of closing, while at 06:00GMT, the FxWirePro's Hourly Yen Strength Index remained neutral at -33.40 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex