Japan’s 30-year government bond yield surged to 2.955% on Monday, its highest level since November 2000, as renewed optimism from the U.S.-China trade talks prompted global investors to dump safe-haven assets, including super-long Japanese government bonds (JGBs).
The 5 basis point jump reflects growing fiscal concerns in Japan and the ripple effect of improved risk appetite globally. Investors moved towards riskier equities after the U.S. and China reached a breakthrough in Geneva, agreeing to suspend retaliatory tariffs and restart structured trade talks.
“Following the Geneva joint statement, we are observing a rotation out of long-dated debt across Asia, with Japan’s 30-year bonds facing the brunt,” a senior economist at Nomura Securities noted. “Foreign demand may taper off further as global funds look for higher yield in equities or shorter-tenure instruments.”
While short-dated JGBs remain resilient due to receding expectations of rate hikes by the Bank of Japan, long-term bonds have been under pressure amid global volatility and subdued domestic investor demand.
Adding to the yield pressure, several major Japanese life insurers are reportedly trimming their exposure to super-long bonds, citing valuation concerns and better returns elsewhere. This comes despite record foreign inflows into Japanese debt in recent months.
Market participants will be closely watching whether the Bank of Japan intervenes or shifts its bond-buying strategy in the face of rising long-term yields — especially ahead of the next policy meeting.
Ahmedabad Plane Crash