Japan Bond Yields Near Multi-Decade Highs Amid Inflation Concerns
Japanese government bond yields have held near multi-decade highs despite a strong auction of super-long-term debt. The benchmark 10-year JGB yield rose 0.5 basis points to 3.090%, just shy of its 30-year high of 3.115% reached last week.
The global bond market has been under pressure, with US Treasury yields climbing to multi-year highs due to inflation fears linked to surging oil prices and expectations of further Federal Reserve rate hikes. The Bank of Japan's decision to raise rates again by the end of the year is also a concern for investors.
Takayuki Miyajima, senior economist at Sony Financial Group, noted that yields near record highs on 40-year bonds were expected to draw demand from insurance companies and foreign investors. However, 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.
The Ministry of Finance sold approximately $1.91 billion worth of 40-year JGBs, with the bid-to-cover ratio rising to 3.1 from 2.82 at the prior sale in July. This marked the highest level since July 2020.