Japan bond yields hold near multi-decade highs after 40-year auction amid inflation concerns
TLT•Japanese government bond yields held near multi-decade highs despite a strong 40-year bond auction, as inflation pressures and expectations of further Bank of Japan rate hikes weighed on the market. The sale raised about 300 billion yen, with the bid-to-cover ratio climbing to 3.1, its highest since July 2020.
1. Yields remain elevated
Japan’s benchmark 10-year government bond yield rose 0.5 basis point to 3.090%, near the 30-year high of 3.115% reached last week. The 20-year yield held at 3.915%, the 30-year yield was unchanged at 4.170%, and the 40-year yield fell 0.5 basis point to 4.220%.
2. Strong auction demand
The Ministry of Finance sold about 300 billion yen ($1.91 billion) of 40-year bonds. The bid-to-cover ratio rose to 3.1 from 2.82 at the previous sale in July, the highest level since July 2020. An auction of two-year securities is scheduled for Wednesday.
3. Inflation and rate concerns
Global bond markets remained under pressure as U.S. Treasury yields climbed to multi-year highs on inflation fears linked to rising oil prices and expectations of further Federal Reserve rate hikes. Bets are also rising that the Bank of Japan will raise rates again by year-end. Sony Financial Group economist Takayuki Miyajima said speculation about additional rate hikes, a higher terminal rate and fiscal expansion continued to weigh on the market.
