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Japanese bonds narrowly mixed in thin trade; focus on BoE’s policy decision

The Japanese government bonds remained narrowly mixed on Thursday, succumbing to thin trading activity during a relatively quiet session that saw data of little significance. Also, super-long bond yields bounced on hopes that the central bank will not buy government debt until next Wednesday.

The yield on the benchmark 10-year bonds, which moves inversely to its price, fell nearly 1 basis point to -0.089 percent, the yield on long-term 30-year note jumped 3 basis points to 0.387 percent and the short-term 2-year JGB yield remained steady at -0.170 percent by 06:40 GMT.

According to Reuters, Finance Minister Taro Aso told reporters after the government's 13.5 trillion yen ($133.60 billion) stimulus package was announced on Tuesday that the ministry would consider 40-year debt in consultation with market participants.

Moreover, the JGBs have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Bank of Japan's target. Crude oil prices inched higher after US gasoline stocks dropped 3.26 million barrels to 238.2 million barrels and weak US dollar. The International benchmark Brent futures rose 0.20 percent to $43.63 and West Texas Intermediate (WTI) climbed 0.22 percent to $40.92 by 06:00 GMT.

The Bank of Japan in its two-day monetary policy meeting, which concluded on Friday, surprised markets by keeping its key interest rate unchanged at prevailing minus 0.1 percent. Also, the central bank kept its base money target at 80 trillion yen.

However, the BoJ announced to increase to increase ETF purchases at an annual pace of 6 trillion yen, up from the current 3.3 trillion yen. This decision was supported by 7-2 votes as board member Takahide Kiuchi and Takehiro Sato opposed the majority decision.

In addition, the central bank in its statement proposed to increase the size of the lending programme that provides dollar funding to Japanese financial institutions and conducts comprehensive assessment of effects of QQE with negative rate policy at next rate review. They further added that the governor Haruhiko Kuroda as chairman of board instructed staff to prepare deliberations on assessment at BOJ's next meeting.

Lastly, Investors are awaiting the Bank of England’s monetary policy decision, which is scheduled to take place on August 4 at 11:00 GMT.

Meanwhile, the benchmark Nikkei 225 closed Nikkei 225 closes up 1.07 percent at 16254.89 and the broader Topix index closed 0.87 percent higher to 1,282.99 points.

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