Japan’s super-long bonds rise after news on issuance cut

TOKYO: Japan’s super-long government bonds rose on Thursday, supported by a Reuters report about the possible reduction of issuance of super-long-dated bonds next fiscal year.

The 30-year JGB yield fell as low as 3.38% from a record high 3.45% marked in the previous session. The yield was last down 3 basis points to 3.395%. Yields move inversely to bond prices.

Japan will likely reduce new issuance of super-long government bonds next fiscal year, Reuters reported on Wednesday, easing worries of oversupply of those bonds.

Super-long bond yields hit record highs in recent sessions over concerns about the size of Prime Minister Sanae Takaichi’s debt-funded stimulus.

The 20-year JGB yield fell as low as 2.94% and was last down 2 bps at 2.965%.

On the other hand, the two-year JGB yield changed course to rise 1 bp to 1.11% after an auction of the bond with the same maturity received weak demand.

Japan’s 30-year yields rise to record highs as stimulus concerns mount

“The weak demand was a reflection of bets for the Bank of Japan’s next interest rate hike,” said Eiichiro Miura, senior general manager of investments at Nissay Asset Management.

BOJ Governor Kazuo Ueda said on Thursday the nation’s underlying inflation is accelerating gradually and steadily approaching the central bank’s 2% target.

Yields on shorter-dated bonds had risen sharply after the BOJ last week raised interest rates to a 30-year high of 0.75%, as prospects for the next rate hike grew.

“The yen weakened as Ueda did not give a clue on the next rate hike last week. And the weaker yen prompted investors to sell JGBs,” said Miura.

The yen held its momentum against the dollar on Thursday, up 0.11% at 155.715 per dollar, as the market braced for potential intervention after a strong warning from the finance minister.

The five-year yield also reversed course to rise 1 bp to 1.500%.

The 10-year JGB yield inched up 0.5 bp to 2.05%.