Japan's super-long bonds briefly change course to fall after weak auction

Japan's super-long-dated bonds briefly changed course on Friday to trade lower after an auction of 20-year bonds drew weak demand due to fiscal concerns.

Here are a few details:

The 20-year bond yield reversed course to rise as high as 3.565%. The yield was ‌last down ⁠3 bps ⁠at 3.535%. Yields move inversely to bond prices.

At the auction, a measure of demand called the bid-to-cover ratio, which gauges total bids against the amount of securities on offer, fell to 2.97, the lowest since May 2025, from 4.01 at the previous sale in May.


Worries about a rise in government spending grew after Japan on Wednesday announced a 370 ⁠trillion yen ($2.3 ‌trillion) investment in its new growth strategy, said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management.

"Concerns about the ⁠expansion of spending weighed on the auction outcome, and also the decline in yields earlier in the session hurt demand," Inadome said.

The government said the investment would be made through fiscal 2040 across 17 strategic sectors, such as AI and chips.

Japanese Prime Minister Sanae Takichi's aggressive spending has plan been a drag for bond prices.

The 10-year JGB yield was down 3.5 ‌bps to 2.63%.

Declines in yields on shorter-dated bonds were supported by the fall in oil prices, which eased inflation concerns, strategists said.

The market shrugged off ⁠comments from a hawkish Bank of Japan board member Naoki Tamura that the central bank should raise rates once every few months and stand ready to speed up the pace of hikes.

"There was no surprise in his comments," said Naoya Hasegawa, chief bond strategist at Okasan Securities.

The 30-year yield also reversed course soon after the auction outcome, rising as high as 3.875%. The yield was last down 3 bps at 3.835%.