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2026-05-28 17:26:18
[Geopolitical risks exert pressure, Bank of Japan may pause interest rate hikes, yield curve steepens further] ⑴ The Japanese government bond yield curve has steepened, with short- to medium-term yields declining while ultra-long-term yields have risen. The market believes that tensions between the US and Iran may force the Bank of Japan to pause interest rate hikes at its policy meeting next month, and the central bank may lag behind the curve. ⑵ Following reports of a new round of US military strikes against Iran, Japanese government bond futures opened down 19 ticks to 128.40, and further fell to 132.32 in the first 30 minutes. The 10-year benchmark yield rose 3 basis points to 2.72%, while the 5-year and 20-year yields both rose 2 basis points to 1.95% and 3.615%, respectively. ⑶ Futures subsequently rebounded from their lows, with newly issued 40-year government bonds performing strongly, their yields briefly falling to 3.75%. The Bank of Japan conducted regular bond-buying operations across 3-5 year, 5-10 year, and 10-25 year maturities. The 3-5 year purchases were particularly strong, putting downward pressure on the 5-year yield. (4) As of Wednesday's close, the 5-year yield fell 2.5 basis points to 1.905%, while the 30-year yield rose 4.5 basis points to 3.96%, further flattening the 30-year and 40-year yield curve. The ruling party proposed issuing "transition bonds" to finance growth plans, but the market reaction was limited.
