JGB 10-year yield plunges following slight growth in September retail sales; BoJ’s monetary policy decision in focus

The Japanese government 10-year bond yield plunged on the first trading day of the week Monday following slower rate of growth in the country’s retail sales for the month of September, albeit meeting market expectations.

Investors will now be looking forward to the Bank of Japan’s (BoJ) monetary policy meeting, scheduled to be held on October 31 for further insight into the debt market.

The yield on the benchmark 10-year JGB note, which moves inversely to its price, slumped nearly 6 basis points to 0.111 percent, the yield on the long-term 30-year note plunged 12 basis points to 0.864 percent and the yield on short-term 2-year traded 1-1/2 basis points lower at -0.119 percent by 05:30GMT.

Data released by Japan’s Ministry of Trade showed that the country’s retail sales rose for the 11th straight month in a row in September, but the rate of growth slowed compared to that in August, indicating that private consumption has failed to make up for the losses incurred in economic growth. September's 2.1 percent annual increase in retail sales beat the Reuters poll median forecast for 1.6 percent, was slower than the 2.7 percent expansion in August.

Further, on a seasonally-adjusted basis, retail sales fell 0.2 percent in September from the previous month, following August's 0.9 percent increase.

According to a report from Reuters, the BoJ is expected to keep monetary policy steady next week and maintain its optimistic view on the economic outlook, even as global trade frictions, growth worries and volatile markets put it further away from achieving its elusive inflation target.

Worries over U.S. corporate earnings is causing further angst among investors, triggering a rout on Wall Street overnight that cascaded through to a global equities sell-off, effectively putting to test the BOJ’s scenario that solid global demand will underpin Japan’s export-reliant economy, the report further added.

Meanwhile, the Nikkei 225 index traded 0.34 percent lower at 21,118.50 by 05:35GMT, while at 05:00GMT, the FxWirePro's Hourly JPY Strength Index remained slightly bullish at 71.72 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex