Global Market: JGB yields fall as 30-year bond yield retreats from record high

Japanese government bond (JGB) yields fell on Thursday, with the 30-year yield retreating from a record high hit earlier this week, as investors remained cautious about the Bank of Japan’s policy tightening path ahead of a closely watched 30-year debt auction, according to a Reuters report.

The benchmark 10-year JGB yield fell 2.5 basis points to 3.080%, while the 30-year yield declined 4 basis points to 4.170%. Bond yields move inversely to prices.

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The Japanese finance ministry is due to auction about 600 billion yen ($3.80 billion) of 30-year bonds later on Thursday. The 30-year yield touched a record 4.25% on Monday amid concerns over Japan’s deteriorating public finances and spillover from a selloff in French government debt, the report stated.

The two-year yield, which is particularly sensitive to expectations for Bank of Japan policy rates, fell 1.5 basis points to 1.93%. The five-year yield declined 2 basis points to 2.390%, while the 20-year yield slipped 3.5 basis points to 3.945%.

The retreat in JGB yields also tracked a decline in global bond yields. U.S. Treasury yields eased from multi-decade highs after strong demand at a 10-year Treasury auction and lower oil prices helped temper inflation concerns.

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Investors remained cautious about the BOJ’s tightening trajectory, with expectations for its next rate hike increasingly shifting towards December. The report stated, citing sources, that while the central bank may leave rates unchanged at its October meeting, it is expected to signal a hawkish bias that could reinforce market expectations of a December increase.

Attention will also be on the BOJ’s regional branch managers’ meeting and the release of its quarterly regional economic assessment later on Thursday, which could provide further clues on the central bank’s assessment of economic conditions and its monetary policy outlook.

The 30-year bond auction will be closely watched for signs of investor demand following the recent surge in super-long JGB yields. Barclays analysts said fiscal concerns remained a drag but noted that elevated yields were broadly near fair value based on longer-term market moves and supply-demand conditions, suggesting the auction could be relatively uneventful, as per the report.

(Disclaimer: This article is based on inputs from agencies. These do not represent the views of The Economic Times)