Auction Results to Be Announced in the Afternoon on the 5th
Weak Demand for 20-Year and 40-Year Bonds Last Month
Market Focuses on Potential for Reduced Issuance Volume
The Japanese government is making another attempt to issue 30-year ultra-long-term government bonds after its long-term bond auction failed to attract sufficient demand last month.
According to Bloomberg News, the Japanese government is scheduled to announce the results of its 30-year government bond auction at 12:35 p.m. (local time) on June 5, 2025.
Bloomberg pointed out that the Japanese government is facing pressure, as demand for 20-year and 40-year government bond auctions was weak last month. The bid-to-cover ratio at the most recent 40-year bond auction dropped to its lowest level since July 2023.
The current yield on the 30-year bond stands at 2.945%, which, while more stable compared to last month, is still considered high. Last month, the yield nearly reached 3.2%, an all-time high, fueling investor concerns about Japan's fiscal soundness.
Several factors have contributed to the recent surge in Japanese long-term bond yields. These include the possibility that the Bank of Japan (BOJ), the central bank, may reduce its bond purchases; the resulting deterioration in bond investment sentiment; the weak demand at the 20-year government bond auction; and delays in the government's stimulus discussions. All these factors have combined to increase market volatility.
Market participants believe that if demand for the 30-year bonds is weak in this auction, investor sentiment toward the entire Japanese government bond market could deteriorate. Namio Namioka, a fund manager at T&D Asset Management, analyzed that "if the results for the 30-year bonds fall short of expectations, there is a risk that yields could rise significantly not only for ultra-long-term bonds but also for 10-year bonds."
However, some market participants are somewhat relieved by the possibility that the Japanese government may reduce the issuance volume of government bonds from a long-term perspective. On May 26, 2025, Reuters reported exclusively that the Ministry of Finance was considering plans to reduce the issuance volumes of 30-year and 40-year bonds. The Financial Times (FT) also reported that the Ministry of Finance had begun conducting surveys among bond dealers and others to gauge demand for government bonds.
Takashi Fujiwara, chief fund manager at Resona Asset Management, stated, "There are expectations that the Ministry of Finance may reduce issuance volumes, so the 30-year bond auction is unlikely to be a complete failure."
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