TOKYO: Japanese government bonds (JGBs) extended their rally to a second day on Monday as elevated yields attracted buyers, while caution prevailed before the auction of super-long debt this week.
Long-dated debt has been sold off around the world in recent weeks, and in Japan, concerns have been exacerbated by a decrease in bond buying by the central bank and political jockeying over stimulus.
Very low demand at the auction of 20-year JGBs last week underscored the diminishing capacity to absorb debt issuance to finance the government’s fiscal deficit.
Japan’s bond yields jump after poor outcome of 20-year debt auction
All eyes will be on the sale of 40-year bonds, Japan’s longest tenor, on Wednesday. With no big and dependable buyers, super-long yields have floated up “like a kite without a string,” said Mizuho chief market economist Yasunari Ueno.
“The macroeconomic issue of fiscal discipline is something that needs to be addressed by the government and ruling coalition,” Ueno said, adding, the Ministry of Finance should address the supply and demand balance for super-long bonds “by adjusting issuance”.
The 40-year JGB yield fell 7 basis points to 3.48%, down from the record 3.675% touched last Thursday.
The 30-year yield fell 6 basis points to 3.005%, retreating from the all-time high of 3.185% hit last week.
The benchmark 10-year yield fell 2.5 basis points to 1.52%.
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