- The 10-year Japanese government bond yield hit 3.03%, a level not seen in three decades, while the 30-year yield traded at 4.1%, near a 30-year high.
- The sell-off in Japanese government bonds came amid speculation that Japan would raise military spending to 3.5% of GDP from around 2%, stoking concerns about fiscal discipline.
- A widely expected 25 basis-point Bank of Japan rate increase is set for Friday and adds to the pressure on long-end Japanese yields.
- Market observers expect turmoil in Japanese bonds to spill over into fresh sell-offs in long-end US and European debt, where yields are already elevated, and to dampen appetite for risk assets.
Quotes
“The nation's 10-year bond yield hit 3.03 per cent this week, a level not seen in three decades, while 30-year bond yields traded at 4.1 per cent, also nearing a 30-year high.”
“A widely expected 25 basis-point interest rate increase by the Bank of Japan on Friday may further fuel the yield gains.”