Super-long JGB yields rise, medium-term yields fall on issuance plan

TOKYO: Long-dated Japanese government bond yields rose on Thursday while medium-term yields declined as details emerged about a government plan to tweak issuance.

The finance ministry will cut the issuance of super-long debt by about 10%, according to a draft document seen by Reuters.

This is a rare revision to plans for the current fiscal year, which were aimed at calming markets following a spike in super-long yields to record highs last month.

Part of the reduction to super-long issuance will be made up with increased supply of shorter-term JGBs, but there was no increase in the five- or 10-year note issuances in the draft.

The 30-year JGB yield rose as much as 2 basis points (bps) to 2.95%, while the 20-year yield erased a decline to rise 0.5 bp to 2.39%.

Bond yields rise when prices fall.

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“The cut in super-long issuance maybe fell a bit short of market expectations, so we saw the super-long end sell off a bit as a result,” said Barclays strategist Shinichiro Kadota. Meanwhile, the lack of increased supply in medium-term notes “was supportive for 5s and 10s,” Kadota said.

The 10-year JGB yield slipped 2.5 bps to 1.43%, and the five-year yield slid 3 bps to 0.975%.

The Reuters report helped support demand at an auction of five-year notes on the day, Kadota said, with a measure of demand called the bid-to-cover ratio - which compares the total bids with the number of bids accepted - rising to the highest since July 2023.

There has been extra scrutiny of sales of JGBs after weak demand at auctions last month helped push super-long yields to record peaks.

Bonds have also been under pressure in Japan and other major markets as investors grow wary about widening fiscal deficits and debt piles.