🚨 Japan is on the edge — and global markets are feeling the tremors. The Ministry of Finance is preparing to slash the issuance of its longest-term bonds (20-, 30-, and 40-year JGBs), triggering a dramatic market reaction as fears over rising debt costs and waning demand hit new highs.
Yields just plunged across the board:
* 30-year JGB yield down 12.5 bps to 2.91%
* 20-year yield dropped nearly 20 bps
* 40-year plummeted 25 bps in a single move
The yen also fell 0.3% against the dollar, and the shockwaves even hit the US Treasury market — pulling 30-year yields down 7 bps as global investors rushed into safer long-term assets.
Why the panic? Japan’s bond buyers — especially life insurers — are backing off. Meanwhile, global investors are flashing red over Japan’s ballooning public debt and the risk of unsustainable borrowing.
This isn’t just a policy shift — it’s a fight to control a market slipping out of balance. With total issuance locked at 172.3 trillion yen, Japan may swap longer bonds for shorter-dated debt. That might calm today’s volatility… but it adds serious rollover risk for tomorrow.
Analysts warn this is a clear sign of bond vigilantes pushing back — and it could be just the beginning. The Bank of Japan hasn’t even started unwinding its bond holdings yet, and already the cracks are showing.
If demand keeps drying up, and borrowing costs climb, Japan could face a fiscal storm. Investors are now watching June’s decision like hawks — because what happens next could ripple through bond markets worldwide.
Stay sharp. The long end of the curve
just got dangerous.
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