On July 22, Japan's 40-year government bond auction attracted the strongest demand since March 2025, as investors were lured by higher yields. The bid-to-cover ratio for Wednesday's auction was 2.82 times, up from 2.702 times in the previous auction and above the 12-month average of 2.55 times. After the auction, Japanese government bond prices were largely flat. Recently, comments from Japanese government officials have emphasized the importance of the massive Government Pension Investment Fund increasing its investment in domestic financial assets, providing support for Japanese government bonds. The 40-year bond yield is currently hovering around 3.895%, after hitting a record high of 4.355% in May. However, some investors remain focused on Prime Minister Sanae Takaichi's expansionary fiscal policy agenda, expectations that the Bank of Japan will tighten rates slowly, and the still-wide interest rate differentials. (Jin Shi)
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