Super-Long JGB Yield Curve Steepening on Back of Supply-Demand Worries

Wall Street Journal

22-05-2025

0310 GMT — Super-long JGB yield curve is steepening on the back of supply-demand worries, Mitsubishi UFJ Morgan Stanley Securities' Takahiro Otsuka says in a research report. Japanese investors are unlikely to lead any easing of these worries, the senior fixed income strategist says, noting demand from domestic investors, primarily life insurers, has been sluggish in recent years. Also, while foreign investors have been large net buyers since the start of 2025, it's difficult to expect more demand from these investors, at least in the near term, the strategist says. There's a strong possibility that these investors are now carrying unrealized losses, the strategist adds. The 20-year JGB yield is 2bps higher at 2.560%; 30-year yield is up 1.5bps at 3.150%; 40-year yield is 1.5bps higher at 3.630%. ([e-mail])
0233 GMT — Surging super-long JGB yields reflect structural lack of Japanese private-sector demand, two members of Barclays' FICC Research say in a research report. Position adjustments and long-term fiscal worries may also be contributing to the yield surge, the two members say. Until structural supply-demand improves, the super-long sector is unlikely to stabilize, they say. Amid the absence of sufficient demand from private investors, any adjustments to the BOJ's quantitative tightening and/or JGB issuance will probably 'take the spotlight,' the members say. 20-year JGB yield is 2 bps higher at 2.560%, 30-year yield is up 1.5 bps at 3.15%, and 40-year yield is 1.5 bps higher at 3.630%. ([e-mail])