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JGBs firm in thin trade ahead of holidays, underpinned by BOJ
December 21, 2016 / 7:17 AM / 8 months ago

JGBs firm in thin trade ahead of holidays, underpinned by BOJ

TOKYO, Dec 21 (Reuters) - Japanese government bond prices edged higher in thin trading on Wednesday, as investors wound down for the upcoming holidays.

The benchmark 10-year yield fell 0.5 basis point (bp) to 0.060 percent, while 10-year JGB futures finished up 0.08 point at 149.81.

In the superlong zone, the 20-year JGB yield fell 1 bp to 0.555 percent, while the 30-year JGB yield shed 0.5 bp to 0.660 percent,

Underpinning JGBs, Bank of Japan Governor Haruhiko Kuroda on Tuesday quashed market speculation that the central bank may soon consider raising interest rates as Japanese yields have risen in line with global bond yields. Kuroda instead vowed to keep policy loose to achieve the BOJ's 2 percent inflation goal, even as the BOJ issued a more upbeat economic assessment.

While the central bank is mulling eventual policy adjustments, it is nowhere close to an interest rate hike. BOJ sources have said it is more open to discussing raising its 10-year bond yield target, and could even contemplate doing it at some point in 2017.

On Wednesday, Japan's government joined the central bank in upgrading its overall assessment of the economy, enhancing its view on household spending, exports and business sentiment, saying consumers' mindsets are improving and exports to Asia are recovering.

Ahead of the Christmas weekend, Friday is a public holiday in Japan. With the BOJ's final meeting of the year out of the way, many investors are closing out positions for the year.

"Moves are very small. We saw few flows today and trading has been very thin," said Keiko Onogi, senior strategist at Daiwa Securities.

"Longterm JGBs traded firmly, particularly in the afternoon session, so the curve faced some flattening pressure today," she said. "But I don't think this is a trend, as the market will probably stay peaceful through the end of the year." (Reporting by Tokyo markets team; Editing by Eric Meijer)

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