Japan bond yields hold near multi-decade highs before 40-year auction

Japanese government bond yields stayed close to multi-decade highs on Tuesday, according to Business Recorder, as inflation concerns framed an auction of the longest-dated debt in the market. The benchmark 10-year yield edged up 0.5 basis points to 3.090 per cent, just under the 30-year peak of 3.115 per cent recorded last week. Yields and bond prices move in opposite directions, so the higher reading means lower prices for existing debt.

Global bond markets stayed under strain as US Treasury yields reached multi-year peaks, with inflation worries linked to oil and possible additional Fed rate increases. Japan's Finance Ministry is set to offer roughly 300 billion yen ($1.91 billion) in 40-year securities later in the session, and a 2-year note auction follows on Wednesday. Sony Financial Group senior economist Takayuki Miyajima noted that newly issued 40-year bonds offer near-record yields, and he anticipated some purchases from insurers and foreign investors.

Miyajima also pointed to speculation about more Bank of Japan rate rises and worries over fiscal expansion. The 40-year yield was flat at 4.225 per cent, while the 20-year and 30-year yields held at 3.915 per cent and 4.170 per cent. The two-year yield, which reacts most to Bank of Japan decisions, stayed at 1.965 per cent, and the five-year was steady at 2.420 per cent, just short of Monday's record.