Japanese government bonds rise on solid 30-year auction as snap election looms

Longer-dated Japanese government ‍bonds rose on Thursday ​following solid demand at a closely watched auction of ⁠30-year debt, even as a crucial election loomed on Sunday that would shape the government's big fiscal stimulus plans.

The 30-year JGB yield sank 6.5 basis points (bps) to 3.57% ‌by 0611 ‌GMT, while 40-year yields slid 9 bps to 3.85%.

The 20-year yield lost 4.5 bps to ‌3.135% and the 10-year yield declined 2 bps to 2.225%.


Bond yields fall when prices rise.

Mizuho Securities strategists said in a note ahead of the auction that "significantly" higher yields compared to the previous auction a month earlier would likely ​attract buyers.

The 30-year yield stood closer to ​3.5% at the time of the January 8 sale.

So-called super-long bonds ‌have been ‍particularly sensitive to a perceived loosening of fiscal restraint ‍by Prime Minister Sanae Takaichi, an acolyte of former premier ‌Shinzo Abe's "Abenomics" policies, with Japan already the developed world's most indebted nation.

The 30-year yield shot up to an all-time peak of 3.88% on January 20 in a bond rout triggered by Takaichi's pledge to waive the sales tax on food for two years as she called for the snap election.

Takaichi's Liberal Democratic Party could ‍capture as many as 300 seats in the 465-seat lower house, recent newspaper polls showed.

"With uncertainty regarding fiscal policy expected ‍to remain until specific ⁠policy details are ⁠revealed well after the election result is known, a sharp decline in interest rates is unlikely in the near term," the Mizuho Securities analysts said.

Shorter-dated yields moved in the opposite direction on Thursday, as they are more closely linked to expectations for monetary policy rather than fiscal worries, with Bank of Japan officials recently leaning more hawkish.

The two-year yield added 1 bp 1.28%, while the five-year yield rose 0.5 bp to 1.68%.