Latest news with #yields
Yahoo
3 hours ago
- Business
- Yahoo
Buyers flee Japanese bonds as political, fiscal risks rise
By Rocky Swift and GregorStuart Hunter TOKYO (Reuters) -Japanese government bonds tumbled on Wednesday, sending benchmark yields to near 17-year highs, as traders priced in increased political risks and a hazy outlook for the central bank's policy normalisation path. In a sign of how nervous markets are, the Ministry of Finance's first sale of super-long government debt since a bruising electoral defeat for Prime Minister Shigeru Ishiba logged the weakest demand in almost 14 years. In a whirlwind day of news, the United States and Japan announced a trade deal, speculation swirled that Ishiba planned to resign, and a Bank of Japan (BOJ) official warned of an economic slowdown. The 10-year JGB yield jumped as much as 10 basis points (bps) to 1.6%, marking its biggest move in months and the highest level since October 2008. Super-long term JGB yields hit record highs in May and are back near those levels as concerns mount over Japan's precarious finances. "We're seeing a possible buyers' strike playing through," said Chris Weston, head of research at broker Pepperstone. "Inflation is running far too hot for where interest rates are. The question is why would you buy at these levels?" he said, adding he expected the selloff could extend to UK gilts too. Sunday's defeat for Ishiba's Liberal Democratic Party and coalition partner Komeito follows their loss of a majority in the more powerful lower house last year. Opposition parties have advocated for tax cuts and increased government spending to help households deal with inflation. Ishiba plans to resign, a source close to the prime minister said. Local media reported the move could happen by the end of next month. However, the prime minister later said there was no truth to the media reports about his intentions. "Attention will soon turn to the next prime minister's policy agenda and any signals of recalibration from the BOJ as JGB yields climb," said Charu Chanana, chief investment strategist at Saxo. After the election defeat, investors expect whoever replaces the fiscally conservative Ishiba will support calls for more government spending, widening an already bloated fiscal deficit at nearly 2-1/2 times the size of Japan's economy. The election result also puts the Bank of Japan in a double bind as prospects of increased spending could keep inflation elevated while potentially prolonged political paralysis and the impact of the trade war provide compelling reasons to go slow on rate hikes. "The market's first instinct was to mark up political risk premia," said Shoki Omori, chief desk strategist at Mizuho Securities, referring to reports of Ishiba's resignation. Investors may struggle to position for the uncertainties around the multiple risks, and "consequently, the super-long sector may continue to exhibit subdued conditions through August, and possibly into September," he said. Ten-year Japanese government bond futures tumbled as much as 1.06 yen to 137.54 yen, their lowest since March 28. Japan's finance ministry has scaled back its issuance plan for super-long bonds in response to the surge in JGB yields and poor demand at auctions. The central bank is due to meet again on policy next week. BOJ Deputy Governor Shinichi Uchida said that the trade deal with the U.S. reduces uncertainty, after earlier warning that economic activity and prices were skewed to the downside. ($1 = 147.0300 yen)
Reuters
3 hours ago
- Business
- Reuters
Buyers flee Japanese bonds as political, fiscal risks rise
TOKYO, July 23 (Reuters) - Japanese government bonds tumbled on Wednesday, sending benchmark yields to near 17-year highs, as traders priced in increased political risks and a hazy outlook for the central bank's policy normalisation path. In a sign of how nervous markets are, the Ministry of Finance's first sale of super-long government debt since a bruising electoral defeat for Prime Minister Shigeru Ishiba logged the weakest demand in almost 14 years. In a whirlwind day of news, the United States and Japan announced a trade deal, speculation swirled that Ishiba planned to resign, and a Bank of Japan (BOJ) official warned of an economic slowdown. The 10-year JGB yield jumped as much as 10 basis points (bps) to 1.6%, marking its biggest move in months and the highest level since October 2008. Super-long term JGB yields hit record highs in May and are back near those levels as concerns mount over Japan's precarious finances. "We're seeing a possible buyers' strike playing through," said Chris Weston, head of research at broker Pepperstone. "Inflation is running far too hot for where interest rates are. The question is why would you buy at these levels?" he said, adding he expected the selloff could extend to UK gilts too. Sunday's defeat for Ishiba's Liberal Democratic Party and coalition partner Komeito follows their loss of a majority in the more powerful lower house last year. Opposition parties have advocated for tax cuts and increased government spending to help households deal with inflation. Ishiba plans to resign, a source close to the prime minister said. Local media reported the move could happen by the end of next month. However, the prime minister later said there was no truth to the media reports about his intentions. "Attention will soon turn to the next prime minister's policy agenda and any signals of recalibration from the BOJ as JGB yields climb," said Charu Chanana, chief investment strategist at Saxo. After the election defeat, investors expect whoever replaces the fiscally conservative Ishiba will support calls for more government spending, widening an already bloated fiscal deficit at nearly 2-1/2 times the size of Japan's economy. The election result also puts the Bank of Japan in a double bind as prospects of increased spending could keep inflation elevated while potentially prolonged political paralysis and the impact of the trade war provide compelling reasons to go slow on rate hikes. "The market's first instinct was to mark up political risk premia," said Shoki Omori, chief desk strategist at Mizuho Securities, referring to reports of Ishiba's resignation. Investors may struggle to position for the uncertainties around the multiple risks, and "consequently, the super-long sector may continue to exhibit subdued conditions through August, and possibly into September," he said. Ten-year Japanese government bond futures tumbled as much as 1.06 yen to 137.54 yen, their lowest since March 28. Japan's finance ministry has scaled back its issuance plan for super-long bonds in response to the surge in JGB yields and poor demand at auctions. The central bank is due to meet again on policy next week. BOJ Deputy Governor Shinichi Uchida said that the trade deal with the U.S. reduces uncertainty, after earlier warning that economic activity and prices were skewed to the downside. ($1 = 147.0300 yen)
Yahoo
3 hours ago
- Business
- Yahoo
China's Long Bonds Join Global Drop as US Trade Tensions Ease
(Bloomberg) -- A global selloff in longer-dated bonds has finally spilled over into Chinese debt, as easing US trade tensions and Beijing's efforts to tackle deflation damp demand for the notes. Trump Awards $1.26 Billion Contract to Build Biggest Immigrant Detention Center in US Why the Federal Reserve's Building Renovation Costs $2.5 Billion Salt Lake City Turns Winter Olympic Bid Into Statewide Bond Boom Milan Corruption Probe Casts Shadow Over Property Boom How San Jose's Mayor Is Working to Build an AI Capital Futures on China's 30-year government securities fell as much as 0.7% on Wednesday to head for the longest run of losses since the contracts were launched in April 2023. Yields on similar-maturity debt in the cash market were on track to rise for a sixth straight session after climbing one basis point to 1.92%. Long-end bonds have borne the brunt of investors' ire worldwide as election largesse and tax cuts trigger fears of bigger fiscal deficits in major markets such as Japan and the US. In the case of China, the rise in yields may suggest that pessimism toward the domestic growth outlook is easing, although a continued increase would likely drive up the cost of government financing. Another extension of the US-China trade 'truce would likely be positive for risk assets, and may encourage a further rotation from bonds to equities,' said Lynn Song, chief Greater China economist at ING Bank NV. 'It would not be surprising to see 30-year yields move higher toward 2% in the event we get risk-positive developments in August.' China's longer-dated notes had earlier shrugged off the selloff in their global peers as investors wagered that authorities would ease policy further and keep liquidity loose to fight persistent deflation. But the focus has now shifted to Beijing's anti-involution drive to curb oversupply in industrial products and boost prices. Becky Liu, head of China macro strategy at Standard Chartered Bank, said the campaign reduces the risk of a prolonged period of deflation and interest-rate cuts. However, the supply-side reforms may be less effective than earlier efforts seen in 2015 to 2016, and this should limit the upside in yields, she added. On the trade front, US Treasury Secretary Scott Bessent said he will meet his Chinese counterparts in Stockholm next week for a third round of talks aimed at extending a tariff truce and widening the discussions. The decline in bonds also came on the heels of the launch of a 1.2 trillion yuan ($167 billion) mega-dam project in Tibet, which is expected to provide more support to the economy. --With assistance from Julia Zhong. Elon Musk's Empire Is Creaking Under the Strain of Elon Musk Burning Man Is Burning Through Cash A Rebel Army Is Building a Rare-Earth Empire on China's Border Thailand's Changing Cannabis Rules Leave Farmers in a Tough Spot How Starbucks' CEO Plans to Tame the Rush-Hour Free-for-All ©2025 Bloomberg L.P.
Bloomberg
8 hours ago
- Business
- Bloomberg
Japan Post Insurance Says Super-Long-Term Yields Near Peak
Japan Post Insurance Co., one of the nation's largest life insurers, said that super-long-term yields are nearing their peak and the company plans to shift holdings from foreign to yen bonds on expectations of a US interest rate cut. 'Japanese government bond yields are attractive on a relative and absolute comparison basis,' said Hiroyuki Nomura, operating officer and senior general manager of Japan Post Insurance Co.'s investment planning department, in an interview Tuesday.
Japan Times
a day ago
- Business
- Japan Times
Japanese bonds remain vulnerable as unpopular Ishiba holds on
Japanese government bonds are vulnerable to further selling following a historic election defeat for Prime Minister Shigeru Ishiba, although the immediate reaction Tuesday has been damped by a rally in global debt markets. Benchmark 10-year bonds fell only slightly as trading resumed in Tokyo, pushing yields up by 1.5 basis points. Stocks opened higher on post-election relief, even as their outlook remains at the mercy of tariffs. The yen dipped and faces downside risks in the coming days and weeks from the prospect of more government spending. While Ishiba hanging on as leader for now provides a measure of continuity for markets, he will also need to find ways to placate opposition lawmakers seeking tax cuts and households wanting relief from inflation. Any concessions to these pressures can be expected to quickly translate into higher bond yields. With Japan's markets closed for a national holiday on Monday, investors expressing an initial view on the election did so largely through the yen, which advanced about 1% against the dollar after weakening for most of July. The currency weakened about 0.1% to trade around 147.51 as of Tuesday morning in Tokyo. "Concerns over fiscal expansion continue to simmer in the market, and in light of the election results, JGBs could come under selling pressure,' said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management. "I anticipate a bearish steepening of the yield curve, driven especially by super-long bonds.' Benchmark 10-year bond yields rose to 1.535%, while the 5-year bond yields rose a basis point to 1.05%. Yields on longer-maturity JGBs of 20 to 40 years dipped slightly on Friday but have been in an acute uptrend over recent months. The moves in Japanese yields, which have flowed through into global markets, reflect concerns among investors that the government is spending beyond its means. "Any sense of calm in JGBs is unlikely to linger. Japan's government will need to get on with expansionary policies to win over support from smaller political parties. Moreover, there is a 40-year auction on Wednesday which is unlikely to be smooth sailing ... Meanwhile, there is a global theme of yield curve steepening which isn't going away,' Bloomberg strategist Mark Cranfield said. A lack of clarity around fiscal and economic policies is likely to dim the global appeal of Japanese assets, at least in the short term, said Dilin Wu, a research strategist at Pepperstone Group. She added that political uncertainty may complicate Tokyo's trade negotiations with Washington, denting market sentiment. "A triple dip scenario is still on the table,' according to Wu, referring to the risk of the yen, bonds and stocks all falling. Despite Ishiba's insistence that he'll remain in charge, "investors are likely to question how much political capital he has left,' she said. Finance Minister Katsunobu Kato said on Tuesday that cutting the consumption tax as proposed by opposition parties would be inappropriate. While Japan's benchmark Topix stock gauge has bounced back from its sharp decline in the wake of U.S. President Donald Trump's tariffs salvo in April, it remains well off the record high set in mid-last year. "For Japanese equities, the picture is more complex,' said Hebe Chen, an analyst at Vantage Markets in Sydney. "A weaker yen may offer short-term support to exporters, but the deepening political noise threatens to erode broader investor confidence.' The yen could also be hit, particularly if long-term government bonds sell off, said Hiroshi Namioka, chief strategist and fund manager at T&D Asset Management. "There's a significant possibility of yen depreciation,' he said. "Although I expect super-long JGB yields to rise, it's for negative reasons. That could prompt yen selloffs.' Nick Twidale, chief analyst at ATFX Global Markets, said he expects selling in Japanese stocks and an overall weakening in the yen, despite its "initial haven move' higher on Monday. "There's plenty of volatility to come on both the domestic front and the trade front,' said Twidale. "I don't think policy uncertainty bodes well for Japanese equities, plus we still have the U.S. tariffs hanging over their heads and the new political setup could make things more tricky,' he added.
