Japanese government bonds show mixed performance, with ultra-long maturities under pressure

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智通财经2026/11/02 09:36

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On Monday, Japanese government bond futures lacked a clear direction. The relative resilience of the 10-year variety was a highlight, while the ultra-long non-active bonds faced obvious selling pressure.
Futures opened 8 tick points higher than last Friday at 126.82, briefly rose to 126.83 and then retreated. The 10-year variety received immediate buying support at the open, with the benchmark yield falling by 1 basis point to around 2.76%. This relative strength continued through the close.
Subsequently, selling pressure on the 20-year and 30-year government bonds weighed on futures. At midday, yields for both varieties rose by about 1.5 basis points to around 3.625% and 3.85%, respectively.
In the afternoon, the 25-year low-coupon non-active bonds saw concentrated selling. Futures dropped to a daily low of 126.49. Yields on two 2051-maturing varieties with 0.7% coupons jumped by 7 and 8 basis points, respectively, and the 10-year yield rebounded to around 2.785%.
The weakness in the ultra-long end may be related to media reports that Japan is considering nearly doubling defense spending over the next five years. If approved, the five-year defense construction budget starting April 2027 will be set at 70 trillion to 80 trillion yen, roughly 1.8 times the current five-year plan's 43 trillion yen.
However, the 10-year variety subsequently regained support and by around 2:20 pm had recovered its earlier losses, surprising some participants who previously expected the 10-year yield to rise to 2.80% to attract demand for this week's 10-year bond auction.
The 20- to 30-year varieties remained weak through the close. Investor activity in the cash market exceeded some participants' expectations, with regional banks showing decent buying interest in 2-year bonds and additional onshore buying seen in medium-term varieties.
As of 3pm, quotations showed the 10-year futures down 0.03 to 126.71, 20-year futures down 0.19 to 90.97, 2-year yield up 0.5 basis points to 1.880%, 10-year flat at 2.770%, 20-year up 2.0 basis points to 3.630%, and 30-year up 3.5 basis points to 3.870%.
In the swap market, the 10-year yen overnight index swap rate fell by 0.125 basis points to 2.67625%, 20-year rose by 0.625 basis points to 3.26875%, and 30-year rose by 1.250 basis points to 3.44375%. The Bank of Japan’s December meeting overnight index swap shows the market pricing probability for a 25 basis point rate hike at 80.0%, unchanged from last Friday.
The Nikkei index fell 208.25 points, or 0.33%, closing at 63,081.86, with USD/JPY at 157.81. Focus turns to Tuesday's 10-year government bond auction and the minutes of the Bank of Japan policy meeting.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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Japanese government bonds show mixed performance, with ultra-long maturities under pressure

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