JGBs rise on cues from US Treasuries; BOJ awaited

Japanese government bonds ( JGBs) firmed on Thursday, taking cues from US Treasuries as investors await Bank of Japan’s ( BOJ) meeting later this week.

The 10- year cash JGB yield edged down half a basis point to 0.055 percent, while the September 10- year JGB futures contract added 0.10 points, finishing at 150.46.

The yield curve flattened slightly as prices rose in the superlong zone, with the 20- year JGB yield falling 1.5 basis points to 0.555 percent, and the 30- year JGB yield shedding one basis point at 0.795 percent.

On Friday, the BOJ is widely ex- pected to keep its monetary policy unchanged, and reassure markets that it will lag the Fed in tapering its massive stimulus program, as Japan’s inflation remains low, despite a strengthening economy.

BOJ Governor Haruhiko Kuroda is also seen dismissing market speculation that the central bank is engaging in “stealth tapering” by stressing that the recent slowdown in its JGB buying is simply the result of a stable bond market, according to sources familiar with the BOJ’s thinking.

In its purchase operations on Thursday, the BOJ bought 280 billion yen ($ 2.55 billion) of one- to- three- year JGBs, 300 billion yen of three- tofive- year JGBs and 100 billion yen of floating- rate JGBs.

An overnight drop in US Treasury yields added pressure to JGB yields.

The US Federal Reserve announced the fourth interest rates increase on Wednesday in 18 months and gave its first clear outline on its plan to reduce its $ 4.2 trillion bond portfolio.