Japan’s 30-year government bond auction drew firm demand as elevated yields attracted investors.
The bid-to-cover ratio at Thursday’s sale was 3.88 compared with 3.79 at the previous auction and a 12-month average of 3.56. Japan’s bonds were steady after the sale.
Global bonds have been under pressure due to inflation concerns triggered by the US-Iran war and amid worries about worsening government finances. Japan’s 30-year yield hit its highest level since its debut this week.
“The auction was somewhat strong, helped by high yields,” said Miki Den, senior rates strategist at SMBC Nikko Securities. “But super-long bonds remain difficult to buy in the secondary market amid concerns over fiscal expansion.”
Investors are cautious about fiscal policy in Japan as Prime Minister Sanae Takaichi seeks to enact a bill to cut the sales tax on food and soft drinks, while questions remain over how it will be funded without the issuance of additional debt. The Japanese government is also considering compiling a second supplementary budget in fiscal 2026, Yomiuri reported.
What Bloomberg Strategists Say:
The bid-to-cover ratio at 3.88 for today’s JGB offering, along with a narrow tail, is a positive signal for the long of the yield curve.
Today’s high yield at 4.12% is the second in a row above 4 and that seems to be in the value zone for fixed-income investors. The outcome will provide a modest boost for Thursday’s 30-year Treasury sale.
— Mark Cranfield, Markets Live Strategist. Read more on MLIV.
Japan’s 10-year government bond auction Tuesday saw solid demand as elevated yields underpinned buying. Long-term bond yields in the US also pared their rise on Wednesday after a sale of 10-year notes signaled that rates at multidecade highs were fueling investor appetite.