Global Bond Markets Rally as Japan Considers Cutting Super-Long Bond Issuance

Long-term U.S. Treasury yields recorded their largest single-day drop since mid-April, driven by a significant rally in Japan’s super-long government bonds. The 30-year U.S. Treasury yield fell 8.4 basis points to 4.953% in early London trading, echoing a steep decline in Japanese 30-year JGB yields, which plummeted 18.5 basis points to 2.85% after hitting a session high of 2.955%. This movement was sparked by reports that Japan’s Ministry of Finance (MOF) is contemplating reducing issuance of super-long bonds to address market concerns over rising yields and fiscal strain. Meanwhile, U.S. investors are reassessing positions following President Trump’s decision to delay a 50% tariff on EU goods until July 9 after discussions with European Commission President Ursula von der Leyen.

Japan’s super-long bonds, including 20-year and 40-year JGBs, saw sharp yield declines, with the 20-year yield dropping 16.5 basis points to 2.34% and the 40-year yield falling 24 basis points to 3.295%. These drops followed earlier, smaller declines driven by expectations of government intervention to curb a sell-off in super-long bonds, which had surged to record levels last week due to a poorly received 20-year bond auction and concerns over Japan’s fiscal health. The MOF’s potential plan to adjust its bond issuance program by mid-to-late June, as reported by sources, aims to stabilize the yield curve and ease investor fears about Japan’s growing debt burden amid political debates over stimulus measures and reduced bond purchases by the Bank of Japan.

In the U.S., the 10-year Treasury note yield declined 4.2 basis points to 4.469%, reflecting cautious market sentiment as investors monitor Trump’s expansive tax and spending bill, which is expected to significantly increase the federal deficit. This bill has heightened demand for higher yields on long-term Treasuries compared to six months ago. Following a weak 20-year Treasury auction last week, markets are bracing for potential volatility with a $69 billion two-year Treasury auction scheduled for today. The combination of Japan’s bond market recalibration and U.S. policy developments continues to shape global yield dynamics, with investors closely watching for further signals from both governments.