Japanese long-dated bond yields ease as buyers return on haven demand

what happened

Reuters reports that long-dated Japanese government bonds gained again on Wednesday, as safe-haven flows and elevated yields drew investors back into the debt market. The 20-year JGB yield dropped by 1 basis point to 3.690%, marking a third consecutive daily decline. Bond yields move opposite to prices.

Abroad, long-maturity US Treasury yields retreated on Tuesday after soft housing figures, and German Bunds also fell on demand for safe assets. These moves followed a worldwide sell-off during the past month that had lifted long-end yields to levels not seen in decades, driven by inflation concerns and heavy public borrowing. On Tuesday, JGB yields dropped sharply and the yen strengthened after a 20-year auction drew record demand.

National Australia Bank's Skye Masters, head of markets research, said on a podcast that higher yields are pulling investors back, which fits with signs of Japanese money flowing home. A Reuters poll published on Wednesday showed most economists expect the Bank of Japan to lift its policy rate to 1.50% in December from 1.25%, while a move at the meeting ending October 30 looks unlikely.

why it matters

For markets, the rebound in long JGBs eases pressure on the long end after a global rout, while expectations for a December BOJ rate increase keep the yen and rate-sensitive assets in focus. Higher yields are attracting domestic buyers, which could support demand at future auctions.

market impact

JGBs and yen: long-end buying and BOJ hike expectations shape the yen and rate-sensitive assets

tags

instruments