Japanese bonds gain following rally in global debt market

The Japanese government bonds strengthened Wednesday, following a rally in the global debt market. The central bank bonds-buying under its massive JGB purchase program boosted investor sentiments. Also, Tuesday’s stronger-than-expected 30-year JGB auction boosted demand for safe-haven buying.

The benchmark 10-year bond yield, which moves inversely to its price, fell 2 basis points to -0.100 percent, the super-long 30-year JGB yield also dipped 2 basis points to 0.408 percent and the short-term 2-year JGB yield slid 1-1/2 basis points to -0.198 percent by 07:00 GMT.

According to Reuters, the BoJ is widely expected to buy 430 billion yen of 5-year to 10-year JGBs, 200 billion yen of 10-year to 25-year JGBs, and 120 billion yen of 25-year to 40-year JGBs under its massive JGB purchase program, as it did on July 13, one day after a monthly 30-year JGB auction.

In terms of recent economic data release, producer prices in Japan were flat in July, expectations was for a decline of 0.1 percent, which would have been unchanged. On an annual basis, prices fell 3.9 percent, against market consensus was for a decline of 4.0 percent after slipping 4.2 percent in the previous month.

Moreover, Bloomberg in its latest survey on the Bank of Japan's September policy meet mentioned that, 22 of the 33 analysts expected that the central bank will opt for further monetary expansion. Additionally, 28 expect the bank to retain its negative interest rate, while more than 22 of those surveyed expect the BoJ to change or delete the two-year time for meeting its 2 percent inflation target.

Lastly, markets will remain keen to focus on the upcoming economic data, highlighted by GDP, industrial production and trade balance.

Meanwhile, the benchmark Nikkei 225 closed down -0.18 percent at 16,735.12 and the broader Topix index closed 0.20 percent lower to 1,314.83 points.