Demand at Japan’s 40-year bond auction sinks
And business tonight. Long-dated
Japanese bond yields rose from 3 week lows after demand for Japanese long-term
debt fell to its lowest since July. That is with a weak showing at today’s
40 a bond auction. The weak appetite sending yields up across various tennis.
A global investors will be watching for the central bank meeting next month.
Where is expected to discuss changes to his tapering of debt purchases. Bank of Japan, Governor Cause to
informed parliament this morning that they are closely monitoring long-term
you as these can also influence short to mules. We’ve been auction earlier this
month for 20 year. Notes had already sparked a rout in Japanese long dated
bonds, highlighting concerns about the country’s finances sandi’s role in that
looks at what’s driving the trend. But it all started with a very bad bond
auction. Last week, Japan’s Ministry of Finance tried to sell about 500 billion
yen worth of 40 year. Bonds has about 3 and a half billion us. But the bid to
cover ratio fell to just 2.0. 2 up to put 70 bit has only offered about
2.2 times the amount on sale. That’s the lowest we’ve seen since July last year.
Remember anything and the free. It’s considered weak and it happened right off the the 40
year bond yield hit a record high of 3.6, 7, 5%, while the 30 year also
spiked to 3.2%. But these are levels we’ve not seen before. A Japanese bonds usually see the safe.
So why is demand low? Well, 3 main reasons. First, the baggage of had the
biggest buyer of Jgbs has been tapering, in other words, slowly reducing get bond
buying program since last year. So that’s a vacuum left their. Secondly, the second biggest buyers, Japanese life
insurance pension funds who usually love long-term bonds. Well, they haven’t
stepped and they’re worried about rising yields looking for shorter durations
said better returns elsewhere for the Japan’s debt levels are massive. Now
we’re talking about 200% of GDP. That’s almost double that of the U.S., which
currently sits at 124%. So to reassure the bond market, the
finance ministry has taken the rare step of sending out a survey to primary
dealers and big bond buyers. The goal, well, the gauge how much demand actually
exists for these ultra-long bonds. Sources say that this is a way to build
consensus before making any formal move to reduce issuance. The markets have
interpreted this as a sign that the government may cut super-long bond
issuance by up to 3 trillion yen. That’s about 21 billion dollars spending
less the market. See this as a half hearted attempt to restore confidence.
Long-dated Japanese bond yields rose from three-week lows, after demand for Japanese long-term debt fell to its lowest since July. A weak showing at today’s 40-year bond auction has sent yields up across various tenors. Bank of Japan governor Kazuo Ueda informed parliament this morning that they are closely monitoring long-term yields, as these can also influence short-term yields. Global investors will be watching for the central bank meeting next month where it’s expected to discuss changes to its tapering of debt purchases. Roland Lim reports.
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Long-dated Japanese bond yields rose from three-week lows, after demand for Japanese long-term debt fell to its lowest since July. A weak showing at today's 40-year bond auction has sent yields up across various tenors. Bank of Japan governor Kazuo Ueda informed parliament this morning that they are closely monitoring long-term yields, as these can also influence short-term yields. Global investors will be watching for the central bank meeting next month where it's expected to discuss changes to its tapering of debt purchases.
Japan has kept interest rates near zero for over three decades to fund various expenditures—including massive purchases of US Treasuries. This worked during the deflationary years, but inflation finally caught up in 2022. Now, Japan faces a dilemma: raising interest rates is necessary to curb inflation, but doing so would sharply increase the government’s debt servicing costs due to its massive debt-to-GDP ratio. It’s essentially a checkmate situation—tighten policy and risk a debt crisis, or maintain low rates and let inflation spiral. There’s no easy way out.
As ordered by Israel America to Japan or face being labelled antisemitic
After 40 years, not sure Japan is still there? (in light of an rapidly aging population)
"The drop in demand for Japan’s 40-year bonds is a clear warning sign about investor confidence in long-term fiscal sustainability. This could have broader implications for global bond markets, especially with rising rates worldwide. 📉🇯🇵
The only way out of this rut is to sell US Treasuries while they still have some value.