Treasury buys times for Japanese bonds, but 3% yield barrier is cracking
TLT•U.S. Treasury buybacks ease pressure on Japanese bonds
Actions by the U.S. Treasury to cap a surge in long-term rates have thrown a lifeline to Japanese bonds, but analysts say it may only delay the inevitable crossing of the closely watched 3% yield threshold.
The 10-year Japanese government bond yield JP10YTN=JBTC climbed to a three-decade high of 2.945% on Tuesday, underscoring the strain rippling through global debt markets as investors grapple with persistent inflation and mounting concerns over government debt burdens.
After long-term U.S. yields hit a 19-year high this week, the Treasury Department announced increased buybacks, followed up by assurances of liquidity support from Treasury Secretary Scott Bessent.
The move helped global bonds recover, at least temporarily, but analysts warn the forces driving Japanese yields higher remain firmly in place.
Bank of Japan tightening bets add to short-term pressure
Short-term JGBs are under pressure too, with yields near multi-decade highs on increasing bets for tightening by the Bank of Japan to protect the yen and tame inflation.
"The phase of rising interest rates is not over," said Keisuke Tsuruta, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.
Weak yen, fiscal policy and inflation keep yields under pressure
Those include a weak yen and loose fiscal policy, according to Mari Iwashita, executive rate strategist at Nomura Securities.
"It would not be surprising if the long-term rate rose to around 3.3%," Iwashita said.
