Yields on Japan’s super-long government bonds climbed to multi-decade highs, driven by persistent concerns over fiscal expansion and fading demand from key investors.
The yield on the 20-year note rose to 2.655% on Thursday, hitting its highest level since 1999. The 30-year yield also climbed to 3.185%, edging closer to a new all-time high since the tenor was first introduced that same year.
The move comes as investors brace for potential fiscal stimulus in the wake of the ruling coalition’s defeat in July’s upper house election, which may increase bond issuance and add pressure to already stretched long-end notes.
Investor demand has also been weakening. Net foreign purchases of bonds maturing in over 10 years dropped to ¥480 billion (US$3.3 billion or RM13.76 billion) in July, according to data from the Japan Securities Dealers Association. That’s just one-third of the amount seen in June, signalling a retreat by overseas investors after their strong buying earlier in the year.
With both foreign and domestic institutional players pulling back, analysts say there are fewer natural buyers to absorb extra supply, leaving the super-long bonds vulnerable to further steepening.
Source: theedgemalaysia