Japanese bonds strengthen on strong 30-year JGB auction

The Japanese government bonds strengthened Tuesday as stronger-than-expected 30-year JGB auction boosted investors’ demand for safe-haven buying.

The benchmark 10-year bond yield, which moves inversely to its price, fell 3 basis points to -0.076 percent and the short-term 2-year JGB yield dipped 1-1/2 basis points to -0.180 percent by 07:00 GMT.

According to Reuters, the Ministry of Finance offered 800 billion yen ($7.82 billion) of 30-year JGBs with a 0.3 percent coupon. The notes sold at a lowest price of 96.50, drawing bids of 3.07 times the amount offered, improving from the previous sale's bid-to-cover ratio of 2.64 times. The tail between the average and lowest accepted prices narrowed to 0.21, compared with that of last month's offering at 0.75, indicating stronger demand for the bonds.

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 PPI, GDP, industrial production and trade balance.

Meanwhile, the benchmark Nikkei 225 closed up +0.69 percent at 16,764.97 and the broader Topix index closed 0.92 percent firmer to 1,317.49 points.