Record retail JGB demand signals bets Japan yields are peaking
TLT•Retail Japanese government bond sales have reached 8.19 trillion yen ($51.77 billion) this fiscal year, surpassing the previous full-year record of 7.27 trillion yen. Five-year fixed-rate bonds made up 65% of November issuance, which carried a 2.39% coupon.
1. Record bond sales
Japanese households have shifted some of their bank deposits into retail government bonds as yields rose to multi-decade highs. Sales reached 8.19 trillion yen so far this fiscal year, exceeding the 7.27 trillion yen record set in fiscal 2005; November issuance doubled from October to 2.03 trillion yen.
2. Five-year bonds favored
Five-year fixed-rate bonds accounted for 65% of November issuance, while 10-year floating-rate notes made up 18%. The five-year bond’s 2.39% coupon was 0.34 percentage points above the 10-year note’s coupon, the widest gap since July 2007. The Bank of Japan is widely expected to raise its key rate to 1.5% in December, and analysts expect further increases towards 1.75% to 2.0%.
