Japanese bonds nearly flat in quiet trade, eyes on UK's EU referendum

The Japanese government bonds traded nearly flat Wednesday, succumbing to thin trading activity as jittery investors looked ahead to Britain's vote on European Union membership scheduled to begin early morning London time Thursday June 23.

The yield on the benchmark 10-year bonds, which moves inversely to its price rose hovered around -1.13 percent and the short-term 2-year JGB yield remained steady at -0.239 percent by 06:25 GMT.

Two opinion polls on Monday showed that the “Remain” camp has recovered some ground in Britain’s European Union referendum debate.

According to the NatCen poll results on the United Kingdom referendum campaign, 53 percent would vote to 'Remain' in the European Union, while, 47 percent would vote to 'Leave'. Similarly, the ORB/Daily Telegraph poll results on the United Kingdom referendum campaign, 53 percent would vote to 'Remain' in the European Union, while, 46 percent would vote to 'Leave'.

On the other hand, a new UK poll by Survation for IG group shows 45 percent favour remaining in the EU vs 44 percent for remaining. This slim +1 percent pro-EU balance is down from 3 percent in the organisation's last survey published on Monday.

The implied probability of a 'Remain' vote in Thursday's EU referendum in the UK has softened a shade to 77 percent according to the latest Betfair odds, down from Monday's recent high at 78 percent.

The Bank of Japan’s minutes of the April meeting, released Tuesday showcased that some members are worried over the Japanese economy and believe that overseas economies continue to pose downside risks to Japan's economy and prices.

At the meeting which was held on April 27-28, the BoJ held off on expanding monetary stimulus even as global headwinds, a strong yen and soft consumption threatened to derail Japan's fragile economic recovery. A few members remained more cautious on the outlook for Japanese inflation trend.

The meeting outlined the need to consider more flexible JGB purchases and few members also said that negative rates impair JGB markets stability, financial market function. One member said the CB's decision to keep policy on hold at the April meeting should not be seen as the central bank changing its thinking on monetary policy, suggesting the member wished to avoid giving an impression the BoJ had become reluctant to ease. But overall, members were sanguine despite lowering their consumer price forecasts, saying they could keep policy on hold because it would take time to see the benefits, Reuters reported.

Lastly, the BoJ offered to buy 350 billion yen of JGBs in the 1 to 3-year zone, 440 billion yen of JGBs in the 3 to 5-year zone, 450 billion yen of JGBs in the 5 to 10-year zone, and 100 billion yen of floating-rate JGBs under its massive JGB purchase program. The BoJ did not offer to buy super-long JGBs today, as the MoF offers 1.1 trillion yen of 20-year JGBs tomorrow.

Meanwhile, the benchmark Nikkei 225 index closed down -0.64% at 16,065.72, and the broader Topix index closed lower 0.72 percent to 1,284.61 points.