Japan's 20-year government bond auction on Tuesday recorded the strongest demand ever, with a bid-to-cover ratio of 5.84, up from 4.01 at the previous sale and well above the 12-month average of 3.73. The tail — the gap between average and lowest-accepted prices — narrowed to 0.07 from 0.15 last month, signaling robust investor appetite.
Super-long Japanese government bond yields have surged toward multi-decade highs amid a global bond selloff fueled by Middle East tensions, higher oil prices, and domestic fiscal concerns. The 20-year JGB yield recently reached levels last seen three decades ago, while the 30-year yield hit a record high.
Investors are focused on how Prime Minister Sanae Takaichi will fund a planned sales-tax cut on food and soft drinks without worsening Japan's fiscal outlook. Takaichi has pledged to pursue fiscal sustainability and manage JGB issuance responsibly in the next budget. Domestic institutions are showing renewed interest: Fukoku Mutual Life Insurance Co. said it may shift more from foreign bonds into yen bonds as yields have risen more than expected.
A key test looms at the Bank of Japan's policy meeting next week. Markets expect rates to stay unchanged, with only a 6.2% chance of a hike priced in, but traders will watch Governor Kazuo Ueda's press conference for signals on future tightening.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing