Japanese government bonds shot up on Friday as weaker-than-expected growth data reinforced a view that the Bank of Japan, which left monetary policy unchanged, will only slowly raise interest rates.
BOJ Governor Toshihiko Fukui said on Friday that he was neither ruling out nor implying there would be another rate rise in interest rates by the end of the year but added that any rate increase would be done gradually. "Fukui made it clear that he had an open stance, trying to have the market unbiased in one way or another," said Hidenori Suezawa, chief fixed-income strategist at Daiwa Securities SMBC.
Fukui's comment prompted some buying in Friday's evening session.
Prior to Fukui's news conference, the BOJ kept the overnight call rate target at 0.25 percent as expected, a month after it raised rates for the first time in six years.
Some market players who sold bonds on Thursday, on speculation the BOJ would cut the amount of JGBs it buys at its regular buying or "rinban" operation, covered short positions as the central bank did not announce such a step, traders said.
The September futures contract jumped 0.58 point to 132.68, erasing hefty losses in the previous session.
The contract fell as low as 132.56 in Friday's evening session before recovering to 132.64
The yield on the benchmark 280th 10-year JGB fell 5 basis points to 1.850 percent.
Earlier, data showed Japan's economy expanded 0.2 percent in the three months to June compared with the preceding quarter, an annualised growth rate of 0.8 percent - less than expected as investment in housing and public works fell sharply.
Economists had expected quarter-on-quarter growth of 0.4 percent and annualised growth of 1.8 percent.
"The Bank of Japan won't be in a hurry to raise interest rates," Masaaki Kanno, chief economist at J. P Morgan, said after the release of the gross domestic product data.
But analysts said the breakdown of the growth data showed capital spending and consumer consumption stayed strong, reinforcing a view that the economy remained on track for moderate growth.
The BOJ said in a monthly report on Friday that the economy is expanding moderately, keeping its assessment unchanged.
JGBs fell in the previous three sessions following Tuesday's weak five-year auction and Wednesday's surprisingly strong Japanese machinery orders data.
"After seeing the GDP figures, market participants came up with a view that this week's data including machinery orders will not push the BOJ to implement an early rate increase," said a trader at an European brokerage.
That view made investors feel more comfortable about buying shorter-dated notes which are more influenced by any changes in monetary policy.
Comments
Comments are closed.