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2026-05-26 17:24:48
[Japanese Bond Yield Curve Flattens, 40-Year Bonds Strengthen but Auction Outlook Divergent; ¥100 Billion Reduction in Issuance Tomorrow] ⑴ On Tuesday, the Japanese government bond yield curve flattened, with the 10-year yield rising 3 basis points to 2.72%, while the 40-year yield fell 5.5 basis points to 4.09%, remaining firm ahead of tomorrow's auction. ⑵ The Ministry of Finance will issue ¥300 billion of new 40-year government bonds through a Dutch auction, a reduction of ¥100 billion from the previous issuance. The Bank of Japan plans to conduct regular bond purchases on Thursday, and Friday will see month-end duration extension inflows. ⑶ However, differing opinions exist within the market. A trader at a Japanese brokerage pointed out that the 30-year and 40-year yields have inverted when calculated using compound interest, and investors may prefer to buy 30-year bonds over 40-year bonds. Institutional data shows that the yield on 40-year bonds issued this week was approximately 3.84%, while the yield on actively traded 30-year bonds was approximately 3.879%. (4) The 10-year bond opened under selling pressure, with the benchmark yield rising 2 basis points to 2.71% in the morning session. It briefly fell to 2.695% during the session, but rebounded in the afternoon to reach 2.725%, while futures fell to a daily low of 128.17. (5) From a psychological perspective, regional accounts continued to sell low-coupon bonds near the 13-year maturity, indicating that some investors are still adjusting their yen bond portfolios to strengthen their resilience against rising yields. A domestic investor sold 40-year JU17 bonds but failed to push up yields; this investor may reposition to newly issued 40-year bonds in tomorrow's auction.
