At Any Rate Asia Cross Asset: What's going on in JGBs?
Jun 5, 2025
In this discussion, Ayako Fujita, J.P. Morgan's Head of Japan Economic Research, and Takafumi Yamawaki, expert on super long-end JGBs, join Tim West, Head of DMGIS Rate Sales for APAC. They delve into the factors driving the sell-off in long-end Japanese Government Bonds, exploring supply-demand dynamics and rising yields. The trio highlights challenges faced by the Bank of Japan, investor behavior shifts, and the impact of Japanese yields on global markets, offering invaluable insights into the evolving bond landscape.
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JGB Market Multi-Sigma Moves
- The JGB market has seen an extraordinary steepening and sell-off in long-end bonds recently.
- Monthly yield moves have been multiple standard deviations above normal post-COVID volatility.
Supply-Demand Imbalance in JGBs
- A growing gap between super-long JGB supply and demand is driving the steepening curve.
- Reduced BOJ purchases and slower lifer demand exacerbate imbalances, pressuring yields upward.
Government Actions to Stabilize JGBs
- The government should reduce net issuance and maintain fiscal confidence to stabilize JGB markets.
- Public support via auction reductions, especially in super-long bonds, is crucial but may only halt further yield rises, not fully fix demand.