Japan bond yields hold near multi-decade highs before 40-year auction

TOKYO: Japanese government bond (JGB) yields held near multi-decade highs on Tuesday as inflation pressures set the scene for an auction of the market’s longest-dated tenor.

Here are a few details:

The benchmark 10-year JGB yield rose 0.5 basis point (bp) to 3.090%, near the 30-year high of 3.115% touched last week.

Yields move inversely to bond prices.

Global bond markets remained under pressure as US Treasury yields climbed to multi-year highs, driven by inflation fears linked to surging oil prices and expectations of further Federal Reserve rate hikes.

Japan’s Ministry of Finance will sell about 300 billion yen ($1.91 billion) of 40-year JGBs later in the session, followed by an auction of 2-year notes on Wednesday.

“Yields on newly issued 40-year bonds are near record highs, and with these high yields, some demand is expected from life and non-life insurance companies, as well as foreign investors,” Takayuki Miyajima, senior economist at Sony Financial Group, said in a note.

“On the other hand, speculation about additional rate hikes by the Bank of Japan, expectations of a rising terminal rate, and concerns over fiscal expansion continue to weigh on the market,” he said.

The yield on the 40-year JGB, Japan’s longest tenor, was flat at 4.225%, while the 20-year yield and 30-year yield also held steady at 3.915% and 4.170%, respectively.

The two-year yield, the one most sensitive to BOJ policy rates, held steady at 1.965%.

The five-year yield was unchanged at 2.420%, just below the record high touched on Monday.