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On Wednesday, demand for Japan’s 40-year government bonds plunged to its lowest level since last July, reinforcing fears that appetite for ultra-long Japanese debt is evaporating.
The lopsided supply-demand dynamic followed a similarly disastrous 20-year auction last week — the worst since 2012 — and comes after a month of heavy selling across Japan’s “super-long” bond market.
Together, the flops suggest that confidence in long-dated Japanese government bonds is breaking down, despite an emergency signal from Japan’s Ministry of Finance that it may scale back issuance of longer maturities to calm the market. And briefly, the announcement did soothe rattled investors across the globe, helping to push down yields across Asia, the UK, and the U.S.
Analysts now say Japan’s shift toward issuing bonds with shorter maturities could become a global test case…
