The Japanese government bonds remained flat after the country’s industrial production for the month of August disappointed market participants coming in at 2.0 percent m/m, down from expectations of and from prior 2.1 percent m/m. also, the ongoing election uncertainness continued to add range-bound trading in the debt market.
The yield on the benchmark 10-year Treasury note, which moves inversely to its price, hovered around 0.06 percent, the yield on long-term 30-year tad up at 0.87 percent and the yield on short-term 2-year traded flat at -0.14 percent by 05:20 GMT.
The Lower House election this Sunday will be the key focus this week. According to the latest polls conducted by three major news organizations, Abe’s Liberal Democrat Party (LDP) and its coalition partner Komeito will win about 300 seats during this election, far above the simple majority of 233. There is even a chance for the LDP coalition to keep the supermajority of 310. The support rate for the main opposition – Party of Hope – has declined after its leader Yuriko Koike ruled herself out from the post of Prime Minister.
The bad scenario is that the LDP achieves a simple majority but loses seats significantly more than expected. This could weaken Abe’s leadership within the LDP, triggering investors’ doubts about the sustainability of Abenomics. Speculations about an early withdraw of QE could emerge, resulting in volatility in the financial markets. Fiscal policy and structural reforms would also face implementation hurdles due to a split the Lower House.
Meanwhile, Japan’s Nikkei 225 rose 0.69 percent to 21,297.00 by 05:30GMT, while at 05:00GMT, the FxWirePro's Hourly Yen Strength Index remained neutral at 19.30 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex
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