The GDP data emerged largely in line with market expectations, so they moved to liquidate their short positions to pocket profits. |
The headline figure was not as strong as expected but the overall picture is strong. Bonds are falling as investors focus on the strong parts of the report. |
The JGB market got some lift from losses in stock prices and from index-trackers (funds) stepping in to purchase government debt paper. |
The latest data show that the year-on-year change in the core national CPI has been at or above the zero for the past three months. This should be interpreted as a sign that Japan is emerging from deflation, and this is in line with the central bank's view. |
The market was caught off guard. |
The news could be a trigger to buy bonds. Investors dislike uncertainty. |
The report suggests we're one step closer to the Bank of Japan's exit from its current loose monetary policy. That's negative for Japanese government bonds. |
There was some concern that the core CPI would fall back into negative territory owing to a decline in oil prices, but perhaps we don't have to worry about that scenario, as crude futures have rebounded recently. |
There's concern about demand for new five-year notes as signs of economic recovery raised speculation an end of easy monetary policy will come sooner than later next year. Japan avoided political chaos with Koizumi's strong victory, which provides a fair wind to stocks and a recovery scenario. |
There's speculation out there that more policy makers will cast votes against keeping the policy unchanged. That is negative for bonds. |
Trading in future contracts led the market today, with bullish sentiment there gradually spreading to cash bonds. This is probably because some investors took heart from a pullback in the equity market here. |
US Treasuries, particularly long-term bonds, were robust on Friday, when the Japanese market was closed. |
US Treasuries, particularly long-term bonds, were robust on Friday, when the Japanese market was closed. Some bond investors view the surge in stocks as bubble while some investors take comfort in the view that the zero-interest rate policy will continue even after the Bank of Japan lifts ultra-loose monetary stance. |
We may have reached a selling climax when we hit 2%, and now some are starting to look for reasons to buy. |
We might see some selling in 20-year bonds before the auction. |