Japan bond yields hold near multi-decade highs before 40-year auction
TLT•Japan’s benchmark 10-year government bond yield rose 0.5 basis point to 3.090%, near its 30-year high, ahead of a 300 billion yen 40-year bond auction. The 40-year yield was flat at 4.225%.
1. Yields remain elevated
Japanese government bond yields held near multi-decade highs as inflation pressures set the scene for an auction of the market’s longest-dated tenor. The 10-year yield rose 0.5 basis point to 3.090%, near the 30-year high of 3.115% touched last week.
2. Forty-year bond auction
Japan’s Ministry of Finance planned to sell about 300 billion yen ($1.91 billion) of 40-year government bonds later in the session, followed by a two-year note auction on Wednesday. The 40-year yield was flat at 4.225%; the 20-year and 30-year yields also held steady at 3.915% and 4.170%.
3. Market pressures
Economist Takayuki Miyajima said high yields on newly issued 40-year bonds could draw demand from insurers and foreign investors. He said speculation about additional Bank of Japan rate hikes, expectations of a rising terminal rate and concerns over fiscal expansion continued to weigh on the market. Global bond markets also remained under pressure as U.S. Treasury yields climbed to multi-year highs.
