5 days ago
Japan bonds fall ahead of auction as concerns over deficits linger
TOKYO - Japanese government bonds (JGB) fell on Wednesday ahead of an auction of long-dated debt at a time when markets are skittish about sovereign fiscal deficits.
Poorly received bond sales last month triggered a surge in yields on Japan's longest-dated debt to records last month. Semblance of calm returned to the market with a reported plan by the finance ministry to curtail issuance of super-long bonds.
A sale of 10-year debt on Tuesday showed strong demand, helping drive a rally in bonds that sent yields lower.
The Ministry of Finance is due to sell 800 billion yen ($5.57 billion) in 30-year bonds on Thursday. The 30-year JGB yield rose 0.5 basis point to 2.940%, still far off from the all-time high of 3.185% hit on May 21.
Long-dated debt sold off around the world last month, and in Japan, concerns have been exacerbated by a decrease in bond buying by the central bank and political jockeying over stimulus that would add to the nation's already hefty debt pile.
Japan's junior ruling coalition partner will propose cutting the consumption tax rate for food items in a campaign pledge for the upper house election slated in July, the Yomiuri newspaper reported on Wednesday. That would add pressure on Prime Minister Shigeru Ishiba to offer more fiscal support to voters.
"If there is a shift toward reflationary fiscal or monetary policy — for example, through a change in Prime Minister Ishiba or an expansion of the ruling coalition — the domestic yield curve can be expected to steepen," Mizuho economists said in a note on Wednesday.
The 10-year JGB yield rose 1.5 bps to 1.495%. The 20-year yield rose 1.5 bps to 2.410%.
The 40-year yield, which touched a record 3.675% last month, was unchanged at 3.1%.
