Core Viewpoint - The Japanese bond market is experiencing a significant sell-off, with the 10-year government bond yield reaching its highest level since the 2008 financial crisis, driven by expectations of a large fiscal stimulus package from the new government led by Prime Minister Kishi [1][6]. Group 1: Bond Market Dynamics - The yield on Japan's 10-year government bonds rose by 2 basis points to 1.765%, marking the highest level since June 2008 [1]. - The 40-year government bond yield hit a record high of 3.695%, indicating increased selling pressure in the long-end of the bond market [1]. - The results of the 20-year bond auction showed weak investor demand, with the bid-to-cover ratio dropping from 3.56 to 3.28, reflecting a decline in investor interest [5]. Group 2: Fiscal Stimulus Expectations - Initial expectations for the supplementary budget were around 14 trillion yen, but indications suggest it could expand to 17 trillion yen, with proposals even reaching 25 trillion yen [6]. - The market is concerned that such a large spending plan will necessitate the issuance of more government bonds, leading to additional supply pressure [6]. - Analysts note that the government's dovish stance may require the issuance of longer-term bonds to finance the spending plan, raising concerns about fiscal sustainability [6]. Group 3: Market Sentiment and Global Impact - The widening "tail" in the auction results, from 0.13 to 0.31, is seen as a signal of weak demand, with the 20-year bond yield nearing its highest level since 1999 at 2.795% [5]. - The rapid rise in Japanese government bond yields could have spillover effects on global markets, as Japan's long-standing ultra-loose monetary policy has positioned its bonds as a benchmark in the global debt market [6]. - Concerns are growing that the risks associated with long-term bonds may spread to other markets, reminiscent of the bond market sell-off in May [7].

Core Viewpoint - Investors are on high alert regarding the unexpectedly weak demand for Japan's 20-year and 40-year government bond auctions, particularly ahead of the new government's economic stimulus plan under Prime Minister Kishi Sanae [1][2] Group 1: Bond Market Dynamics - The yield on Japan's 20-year government bonds rose to 2.815%, marking the highest level since 1999, driven by concerns over increased fiscal spending plans that may significantly boost inflation and exacerbate Japan's already heavy debt burden [1] - The 40-year bond yield surged by 8 basis points to its highest level since its public market debut in 2007, indicating heightened market volatility [1] - The bid-to-cover ratio for the previous 20-year bond auction was 3.56, compared to a 12-month average of 3.30, suggesting potential weakness in upcoming auctions [4] Group 2: Economic and Fiscal Concerns - A faction within the ruling Liberal Democratic Party is urging the government to prepare a substantial budget of approximately 25 trillion yen (about 161 billion USD) to support the forthcoming stimulus plan [4] - Recent data showed a contraction in Japan's GDP for the last quarter, providing justification for the government's push for significant fiscal expansion [4] - Analysts from Goldman Sachs noted that as investors grow increasingly wary of the potential scale of stimulus exceeding market expectations, Japan's fiscal risk premium is returning, which could exert significant selling pressure on long-term sovereign bonds and the yen [4] Group 3: Global Market Implications - Amundi's recent report indicated that due to concerns over increased borrowing by the new Prime Minister, yields on long-term Japanese government bonds may reach new historical highs in the coming months [5] - The potential for a "Japanese bond sell-off storm" could re-emerge, reminiscent of past market disruptions, if long-term bond yields rise sharply [5] - The "Sanae trade" reflects market expectations for a revival of "Abenomics," characterized by stronger fiscal stimulus, industry support, and a cautious stance on monetary tightening, leading to significant fluctuations in the stock, bond, and currency markets [6]

Group 1 - Japanese long-term government bonds have declined further, raising concerns about the potential impact of Prime Minister Kishi's upcoming large-scale economic stimulus plan on public finances [1][4] - The yield on Japan's 40-year government bonds has surged by 8 basis points to 3.68%, the highest level since its issuance in 2007; yields on 20-year and 30-year bonds have also increased by at least 4 basis points [1][4] - The government is considering an additional budget of approximately 14 trillion yen (about 91 billion USD) for the current fiscal year, exceeding last year's 13.9 trillion yen, reflecting Kishi's commitment to a "responsible and expansionary fiscal" policy [4] Group 2 - The recent GDP data showing a 1.8% annualized decline in Japan's third quarter supports the push for a large-scale stimulus plan, marking the first negative growth in six quarters [4] - Market participants are closely monitoring the upcoming auction of 20-year government bonds, with expectations of weak demand due to the current volatility in the bond market [4] - Prime Minister Kishi is scheduled to meet with Bank of Japan Governor Ueda, with market attention focused on their statements for clues regarding the timing of the next interest rate hike [5]

Core Viewpoint - Concerns over Japan's fiscal situation have intensified, leading to a significant sell-off of long-term government bonds, with the 20-year bond yield reaching its highest level in 25 years [1] Group 1: Market Reactions - The 30-year bond yield increased by 5 basis points to 3.26%, while the 40-year bond yield rose by 5.5 basis points to 3.6%, reflecting a global sensitivity among investors towards government fiscal discipline [1] - The sell-off in Japanese bonds mirrors a recent downturn in U.S. and U.K. bond markets, indicating a broader trend of investor caution regarding government fiscal policies [1] Group 2: Economic Stimulus Focus - Traders are closely monitoring the actual spending scale of Prime Minister Kishida's economic plan, especially after GDP data indicated economic contraction, which provides justification for stimulus measures [3] - The upcoming economic stimulus plan's specifics are a central uncertainty driving the current bond sell-off, with reports suggesting the government may consider a supplementary budget exceeding last year's 13.9 trillion yen [4] Group 3: Investor Sentiment - Investors are cautious about the scale of the government's economic stimulus plan, as uncertainties regarding its impact on government bond issuance are exerting pressure on long-term bonds [5] - Goldman Sachs noted that rising concerns over a potentially larger-than-expected stimulus plan are causing Japan's fiscal risk premium to increase, putting pressure on long-term sovereign bonds and the yen [5] - The current political context and market sentiment have heightened concerns ahead of the upcoming 20-year bond auction, with participants keenly observing the auction results to gauge demand for Japanese long-term bonds following the yield surge [5]

Core Viewpoint - Japan's long-term government bonds experienced a significant decline due to rising concerns over fiscal stability ahead of the anticipated economic stimulus plan from the government [1][4]. Group 1: Bond Market Reaction - The yield on Japan's 20-year government bonds surged to its highest level since 1999, while the 30-year and 40-year bond yields rose by 5 basis points to 3.26% and 5.5 basis points to 3.6%, respectively [1]. - Investors are closely monitoring the actual spending data in the upcoming economic stimulus plan to assess the potential risks of increased debt threatening market stability [4]. Group 2: Economic Data and Government Response - Japan's GDP data showed a year-on-year decline of 1.8% in the third quarter, marking the first negative growth in six quarters, which supports the need for a large-scale stimulus plan [4]. - The government is considering an additional budget of approximately 14 trillion yen (about 91 billion USD) for the current fiscal year, exceeding last year's 13.9 trillion yen, reflecting a commitment to a "responsible and expansionary fiscal" approach [4]. Group 3: Market Sentiment and Future Outlook - Goldman Sachs indicated that concerns over the potential scale of the stimulus exceeding expectations are leading to a return of fiscal risk premiums, putting pressure on long-term bonds and the yen [5]. - There is increasing apprehension among investors regarding the upcoming auction of 20-year government bonds, with expectations that if the additional budget exceeds 14 trillion yen, the yield curve may steepen further [5].

Core Insights - Japan's 2-year government bond yield has risen to 0.931%, the highest level since June 2008 [1] - The 5-year government bond yield in Japan has increased by over 2% [1] - The 20-year government bond yield in Japan has risen by nearly 1% [1]

Core Viewpoint - The demand for Japan's 20-year government bonds reached a multiple of 4 during the recent issuance, marking the highest level since 2020 [1] Group 1 - The issuance demand multiple of 4 indicates strong investor interest in long-term government securities [1] - This level of demand suggests a favorable environment for government borrowing and reflects confidence in Japan's economic stability [1]

Group 1 - The upcoming 10-year government bond auction in Japan is seen as a critical test of investor demand amid rising expectations for interest rate hikes by the Bank of Japan and ongoing political uncertainty [1][2] - The Bank of Japan is gradually reducing its large-scale bond purchases, leading to an increase in government bond yields, which have reached multi-year highs [1][2] - Recent bond auctions have shown weak demand, with the last 10-year bond auction demand falling below the 12-month average and the 2-year bond auction hitting a 16-year low [1][2] Group 2 - Market analysts suggest that the continuation of the interest rate hike cycle and the ongoing reduction in bond purchase scale will likely push bond yields higher, making investors cautious about buying at current levels [2][4] - The outcome of the ruling party's election review will influence whether lawmakers support an early leadership election, adding another layer of uncertainty to the market [2][4] - The Japanese Ministry of Finance is consulting primary dealers about further reducing the issuance of long-term bonds, which may impact market dynamics [4]

Core Viewpoint - The yield on Japan's 20-year government bonds has increased by 1.5 basis points to 2.65% [1] Group 1 - The rise in yield indicates a potential shift in investor sentiment towards long-term government debt in Japan [1]

Core Viewpoint - The trust vote initiated by French Prime Minister François Béru is causing a "double whammy" in French assets, reflecting a broader global long-bond storm amid rising government debt and interest rates [1][5][9]. Group 1: Political Context - Prime Minister Béru announced a trust vote for his government on September 8, aimed at pushing through a controversial €44 billion austerity plan amidst economic growth pressures and public demand for fiscal support [1][6]. - The political deadlock in France has raised concerns about the government's stability, with major opposition parties indicating they will vote against the trust motion, potentially leading to the government's collapse [7][8]. Group 2: Market Reactions - Following the announcement, French assets faced significant sell-offs, with the 10-year government bond yield rising by 9 basis points to 3.51%, and the spread against German bonds widening to 78 basis points, the highest since April [1][8]. - The CAC 40 index dropped by 2%, continuing a previous decline of 1.6%, while broader European indices also fell, with the Euro Stoxx 50 down by 1.2% and the DAX down by 0.85% [1][2]. Group 3: Global Implications - The situation in France is indicative of a larger "slow-motion crisis" in the global long-bond market, with rising yields in Germany and Japan reflecting increasing government debt levels and concerns over fiscal discipline [9][11]. - The global environment of rising interest rates and high debt levels is leading to increased scrutiny of fiscal policies and political stability, with France's political gamble striking a sensitive nerve in the market [12].