Japan 30-year bond yields spike ahead of PM's key speech

Japan's 30-year government bond yield surged to a record high on Monday, reaching 4.235 percent before slightly easing to 4.22 percent. The spike came as investors anticipated remarks from Prime Minister Sanae Takaichi at the opening of an extraordinary parliamentary session. Markets are closely watching her speech, particularly after reports suggested she might pledge a flexible response to economic and financial market developments.

Analysts are scrutinizing Takaichi's potential shift in policy, especially amid U.S. pressure to address the yen's weakness. Masahito Sugawara, a senior strategist at Daiwa Securities, noted that bond yields are currently priced based on expectations of a policy change. However, if Takaichi signals a continuation of her expansionary policies, yields could rise further.

Investors are also concerned about Takaichi's spending plans, which could exacerbate Japan's fiscal challenges. Meanwhile, global government bonds have faced pressure due to rising energy prices, persistent inflation, and expectations of higher interest rates. Over the weekend, U.S. Treasury yields reversed earlier declines following a weaker-than-expected September jobs report, which reduced bets for further Federal Reserve rate hikes.

In contrast, Japan's shorter-dated bonds saw yields decline. The two-year JGB yield fell 1.5 basis points to 1.9 percent, while the 10-year bond yield dropped 2 basis points to 3.08 percent.