The longest-dated Japanese government bond yields climbed to record highs Tuesday, as concerns over demand intensified following a weak 20-year debt auction.
The 20-year bond yield rose 15 basis points to 2.555%, the highest since October 2000, while the 30-year yield surged 17 basis points to a record 3.14%. The 40-year yield also hit an all-time high, jumping 15 basis points to 3.6%.
Demand for long-term bonds is slowing, creating challenges for the Bank of Japan as it seeks to exit a decade of ultra-easy monetary policy. The central bank has been reducing monthly bond purchases, unwinding stimulus measures introduced by its predecessor.
However, the rising yields on super-long bonds have sparked calls for the BOJ to halt tapering or increase purchases in that sector to stabilize the market.
Market liquidity for these bonds has fallen sharply, and auction results have highlighted ongoing supply-demand imbalances. Investors and brokers are reluctant to hold inventories, raising fears of a sell-off that could spread to shorter maturities.
The 10-year yield also climbed to 1.525%, its highest level since late March, while futures prices fell to their lowest since early April.
The BOJ faces the challenge of raising interest rates amid an economy expected to absorb the impact of higher U.S. tariffs. Policymakers have indicated that rate hikes could resume if economic conditions improve.
Recent easing in U.S.-China trade tensions has supported expectations for a possible rate increase by the end of the year. The current policy rate remains at 0.5%, with investors seeking to determine the appropriate yield levels for long-term bonds in a market with reduced central bank support.
