The 10-year JGB auction earlier today went rather smoothly with a bid-to-cover ratio of 3.30. That pointed to some demand from investors likely amid higher yields but the selling looks to be continuing after now. 10-year Japanese government bond yields had hit its highest levels since 1999 earlier this week and are keeping thereabouts around 2.12% on the day.
Meanwhile, 30-year yields are not holding back in rising further by 3 bps to 3.485%. That follows from the gap and jump higher yesterday by around 6 bps compared to the end of last year. And it doesn’t just stop there. 20-year yields are also up around 10 bps this week to 3.08% and 40-year yields are up 8 bps to 3.69%.
As much as there is spillover pressure on the Japanese yen currency, one can argue that what is happening in the bond market might actually pose the biggest risk to the economy this year. This is something the government and the BOJ will have to watch very closely, with things definitely having accelerated in the past three months.
As a reminder, all of these rapid moves are coming after Takaichi was elected prime minister. And her more expansionary fiscal policy path is now butting heads with the Bank of Japan, as the central bank is looking to try and raise interest rates. So, it’s a really tough situation to deal with.
Considering the selloff in Japanese bonds (surging yields), the fact that the currency is also facing intense scrutiny and pressure points to the notion that traders and investors are more worried about fiscal and economic concerns
