June 15, 2017 / 6:40 AM / a month ago

JGBs rise on cues from U.S. Treasuries; BOJ awaited

2 Min Read

TOKYO, June 15 (Reuters) - Japanese government bonds firmed on Thursday, taking cues from U.S. Treasuries as investors await Bank of Japan's 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 point to finish 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 shed one basis point at 0.795 percent.

On Friday, the BOJ is widely expected to keep its monetary policy unchanged, and reassure markets it will lag the Fed in tapering its massive stimulus programme, 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 Japanese government bond 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- to five-year JGBs and 100 billion yen of floating-rate JGBs.

An overnight drop in U.S. Treasury yields added pressure to JGB yields.

The U.S. Federal raised interest rates on Wednesday as widely expected, and gave its first clear outline on its plan to reduce its $4.2-trillion bond portfolio.

But the moves were overshadowed by inflation and retail sales data earlier in the day that fell short of market expectations, and sent the benchmark 10-year U.S. Treasury yield to a seven-month low.

The Fed also tweaked down its inflation forecast, saying it expects U.S. inflation to be at 1.7 percent by the end of this year, down from the 1.9 percent it previously expected. ($1 = 109.5900 yen) (Reporting by Tokyo markets team; Editing by Sherry Jacob-Phillips)

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