Group 1 - The demand for Japan's two-year government bond auction has dropped to its lowest level in 16 years, with an average bid-to-cover ratio of 2.84, significantly lower than the previous auction's 4.47 and the 12-month average of 4.01 [1][4] - The yield on Japan's two-year government bonds has risen to 0.866%, just a few basis points below the highest level since 2008, reflecting market speculation about a potential interest rate hike by the Bank of Japan [1][4] - Japan's inflation rate has consistently exceeded the Bank of Japan's target of 2%, with the core CPI rising 3.1% year-on-year in July, surpassing market expectations [4][5] Group 2 - Concerns over rising inflation and expectations of increased government bond issuance following the ruling coalition's loss in the upper house elections have contributed to weak demand for Japanese government bonds [4][5] - The continuous rise in long-term government bond yields is starting to deter foreign investors, who are slowing their purchases of Japanese long-term bonds [5] - Market participants are closely watching the upcoming Tokyo CPI data, which is expected to show strong performance, potentially reinforcing the Bank of Japan's belief that inflation is moving towards sustainable targets [5]

Core Viewpoint - Japanese super-long-term government bonds rebounded amid pre-election volatility, reversing earlier sell-off concerns related to potential increased government spending due to the upcoming Senate elections [1] Group 1: Market Reaction - On Wednesday, prices of Japanese super-long-term government bonds increased, with the 30-year bond yield dropping by 10 basis points to 3.06% and the 40-year yield also decreasing by 10 basis points to 3.38% [1] - The 30-year yield had previously surged to its highest level since 1999 on Tuesday, indicating significant market fluctuations [1] Group 2: Investor Sentiment - Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management, noted that investors likely engaged in buying to counteract the severe sell-off observed the previous day [1] - Michael Brown, a senior research strategist at Pepperstone, commented on the ongoing political tension as elections approach, suggesting that the market has largely released its sell-off sentiment and may remain cautious until election results are announced [1]

Core Viewpoint - Japan's largest life insurance company, Nippon Life Insurance, anticipates a gradual decline in long-term Japanese government bond yields due to improving demand and progress in US-Japan tariff negotiations [1] Group 1: Economic Outlook - The company expects the Japanese economy to slow down due to tariff impacts but does not foresee a recession [1] - Concerns about fiscal expansion are heightened due to increased US defense spending requests and the upcoming Japanese Senate elections [1] Group 2: Interest Rate and Bond Market - There is a risk of rising interest rates, but the Ministry of Finance is reducing the issuance of long-term bonds, which will narrow the supply-demand gap [1] - The Bank of Japan is likely to slow down the pace of government bond purchase reductions starting from April 2026, considering market stability and participant feedback [1] - An interest rate hike by the Bank of Japan may occur once in the second half of the fiscal year 2025 [1] Group 3: Potential Risks - If US-Japan negotiations falter and have significant economic impacts, there is a possibility that no interest rate hike will occur within the current fiscal year [1]

日本即将迎来两大关键风险事件——7月9日对等关税大限到期、7月20日参议院选举。 据追风交易台消息，摩根士丹利发布最新研报指出，短期内，这两大事件是影响日元和日债收益率波动的催化剂。 据央视新闻，当地时间6日，日本首相称不会在日美贸易谈判中轻易妥协。大摩指出，若美日贸易谈判破裂，对等关税提高，这 会加剧对全球经济增长的担忧，引发避险模式，进而推高日元。因此，摩根士丹利建议维持做空美元/日元，目标价135，止损位 151。 随后市场将目光汇聚在7月20日日本参议院选举。若执政党失利，市场会预期更激进的财政刺激，这会推高日本超长期国债收益 率。 7月9日逼近，贸易谈判破裂将推高日元 摩根士丹利强调，短期内风险事件是7月9日"对等关税"暂缓期的最后期限。 目前美国和日本的谈判陷入僵局，主要卡在汽车关税问题上。据央视新闻，特朗普还威胁称，如果谈不成，日本的对等关税总税 率可能从24%提高到30%-35%。 不过，摩根士丹利指出，许多市场参与者对关税问题持相对乐观态度，认为7月9日的期限可能会延长，最终谈妥的关税税率不会 高于目前水平。 例如，6月中旬QUICK外汇月度调查显示，近一半受访者认为7月9日前会宣布一项政策 ...

德商银行：日本超长期国债市场处境艰难 跟踪国债市场动态 +订阅 金十数据6月16日讯，德国商业银行研究分析师Michael Pfister与利率策略师Erik Liem在报告中指出，日 本超长期国债市场正面临困境。他们表示："市场对日本央行的通胀和利率预期正在稳步上升。"两人 称，日本财务省正考虑将政府债券供应从超长期债券转向短期债券，但这可能只能暂时缓解局面。而因 为这无法解决超长期日本国债收益率上升的根本原因，通常作为长期债券最大投资者的 "长期投资 者"（Lifers）正在减少需求。 ...

Group 1 - Japan plans to repurchase ultra-long-term government bonds to curb the sharp rise in bond yields, which has raised concerns among policymakers [1] - The yield on Japan's ultra-long-term bonds has reached historical highs, influenced by the recent surge in U.S. Treasury yields and domestic supply issues [1] - The Japanese Ministry of Finance will make a final decision on the bond repurchase after meetings with market participants on June 20 and 23 [1] Group 2 - Analysts express optimism about the government's measures, suggesting that the challenges in the Japanese bond market are "technical" rather than "structural" [2] - Approximately 90% of Japanese government bonds are held domestically, indicating that supply-demand imbalances are more about timing than fundamental flaws [2] - The Bank of Japan may discuss slowing down its bond purchases in an upcoming policy meeting, with potential reductions in the quarterly purchase scale [2] Group 3 - The recent rise in long-term bond yields has supported the yen, as capital flows back to Japan may strengthen the currency [3] - Analysts predict that the USD/JPY exchange rate could decline from 144 to 136 by the end of September due to domestic investor behavior [3] - The Bank of Japan's hawkish stance may encourage domestic investors to favor local bonds over foreign ones [3]

Global Macro - The rapid rise in Japanese super-long government bond yields since mid-May 2025 has triggered turbulence in the global bond market, with the 40-year bond yield surpassing 3.68%, the highest since its issuance in 2007 [2][6][23] - The increase in yields reflects structural changes in the global bond market amid fiscal expansion and diverging central bank policies, with expectations of further fiscal easing pushing up risk premiums [2][6][23] Japanese Long-term Bond Yield Dynamics - The primary driver of the recent rise in Japanese long-term bond yields is the gradual normalization of the Bank of Japan's monetary policy, which has created conditions for the repricing of super-long government bonds [3][24] - A structural imbalance in supply and demand has exacerbated market volatility, as the absence of the Bank of Japan as a "super buyer" has removed crucial market support [3][30] - The demand side is also under pressure, with rising interest rate expectations leading domestic institutional investors to adopt a wait-and-see approach, further weakening buying power [3][37] Economic Challenges and Policy Dilemmas - Japan's economy faces dual challenges of weak domestic demand and external tariff shocks, with the central bank caught in a policy dilemma [3][52] - The government debt-to-GDP ratio has surpassed 260%, raising concerns about fiscal sustainability as rising long-term bond yields increase borrowing costs [3][60] Spillover Effects on Global Bond Markets - The volatility in Japanese long-term bond yields has significant spillover effects on the U.S. Treasury market, with Japanese insurers and pension funds potentially exerting structural selling pressure on U.S. bonds [3][64] - The global bond market is undergoing a systematic reassessment of risk premiums, with Japan's long-term bond yields acting as a "ballast" in the global interest rate system [3][70] U.S. Treasury Yield Outlook - Short-term risks for U.S. Treasury yields are notable, with expectations of a resolution to the debt ceiling issue leading to substantial net issuance of $300-400 billion within 2-3 months [3][91] - The anticipated fiscal policies under the Trump administration may further pressure U.S. Treasury yields, with a projected range of 4.0-5.0% for the 10-year yield by the end of 2025 [3][105]

Group 1 - The Japanese Ministry of Finance is considering adjustments to its bond issuance plan for the current fiscal year ending March 2026, potentially including a reduction in the issuance of ultra-long-term bonds [1] - A survey questionnaire was sent to market participants regarding the appropriate issuance scale of government bonds, indicating a strong policy signal from the Ministry of Finance [1] - Following the news, the yield on Japan's 20-year government bonds dropped significantly by 17.5 basis points to 2.37%, down from 2.6% the previous week [1] Group 2 - The recent poor demand in a 20-year bond auction has prompted the Japanese Ministry of Finance to reassess its bond issuance strategy, marking the weakest demand in over a decade [10] - Market attention is now focused on the upcoming 40-year bond auction, where weak demand could further increase yields and accelerate selling pressure, while strong demand could provide short-term stability [11]

Core Viewpoint - Japan's bond market is facing a structural crisis despite a temporary technical rebound in long-term bond yields, particularly the 30-year and 40-year bonds, which saw a decline of 7 basis points to 3.029% [1][4]. Group 1: Market Dynamics - The recent sell-off has pushed the yields of 30-year and 40-year bonds to their highest levels since issuance, indicating a significant market stress [4][5]. - The upcoming auction of 40-year bonds is critical; weak demand could lead to further yield increases and exacerbate the selling cycle, while strong demand may provide temporary stability [4][5]. Group 2: Supply and Demand Imbalance - There is a pronounced steepening of the yield curve in Japan, exacerbated by the central bank's significant reduction in bond purchases, with traditional buyers like life insurance companies failing to fill the gap [5]. - Japanese life insurance companies reported a more than doubling of domestic bond investment losses in the last fiscal year, highlighting the growing supply-demand imbalance [5]. Group 3: Policy and Market Sentiment - The Bank of Japan's Governor has not indicated any plans to intervene in the bond market, contributing to increased market volatility and uncertainty [5]. - The outcome of the 40-year bond auction is seen as a crucial test of market demand, with potential implications for future market stability [5].

Group 1 - The rise in ultra-long-term government bond yields in Japan is attributed to a decline in demand from domestic long-term investors such as life insurance companies and pension funds, coupled with a slowdown in the Bank of Japan's bond purchasing pace, leading to a lack of buyers in the ultra-long-term bond market [1] - Foreign investors are entering a market with poor liquidity, causing more severe market volatility compared to previous periods [1] - Political pressure on Prime Minister Kishida to increase spending and reduce taxes ahead of the July Senate elections has led investors to demand a higher risk premium due to Japan's fiscal challenges [1] Group 2 - The increase in ultra-long-term yields has limited impact on mortgage rates and corporate borrowing costs, as most loans in Japan are based on short-term rates; however, an overall upward shift in the yield curve could increase borrowing costs and harm the economy [2] - Rising yields will increase the financing costs of Japan's massive public debt and restrict future fiscal spending [2] - Market dysfunction complicates the Bank of Japan's plans to reduce its balance sheet, and delays in quantitative tightening may limit the central bank's policy space to respond to the next economic downturn [2] Group 3 - The Bank of Japan is unlikely to take immediate action unless there is a panic sell-off in the entire bond market, as its focus has shifted to restoring market functionality after last year's removal of the zero interest rate cap [3] - In the upcoming mid-term review, the Bank of Japan may maintain its current bond purchase reduction plan until March next year, although there is room for intervention in cases of extreme market tension, the threshold for such intervention is high [3] - The Bank of Japan may adjust its regular market operations, such as changing the composition of bond purchases, and could maintain or slow down the balance sheet reduction pace in plans beyond fiscal year 2026 to avoid disrupting the market [3] - The Japanese Ministry of Finance has remained silent so far, but it may reduce the issuance of ultra-long-term bonds after meetings with investors in mid-June; another option could be early redemption of outstanding ultra-long-term bonds, though this is currently unlikely [3] Group 4 - The Bank of Japan states that monetary policy is determined by controlling short-term rates rather than bond yields, and committee member Akira Noguchi opposes hasty intervention, indicating that fluctuations in yields will not directly affect the pace of interest rate hikes; however, if soaring yields damage market and corporate confidence, the central bank may be forced to pause rate increases [4]