Highest since 1999! Japan's 30-year government bond yield soaring, leading to a global bond market sell-off frenzy.

The prices of Japanese government bonds continue to fall, exacerbating a global sell-off in the debt market, as rising oil prices have triggered inflation concerns and pushed yields to the highest levels in decades. The yield on Japan's 30-year government bonds surged by 20 basis points, reaching the highest level since the issuance of bonds with that term in 1999, driving up the yields on Japan's 10-year and 20-year government bonds by around 10 basis points. Investors are waiting for the results of the auction of Japan's 5-year government bonds to be held on Monday afternoon, with yields on 5-year government bonds also climbing. Current market concerns about inflation and government spending may be exacerbated by the possibility of the Japanese government issuing more debt. According to sources, Prime Minister Naoto Kan is expected to announce an additional budget plan to address rising commodity prices resulting from the conflict in the Middle East. Previously, Finance Minister Kozo Yamamoto stated last Friday that the government did not see an immediate need to increase the budget. Keisuke Tsuruta, Senior Fixed Income Strategist at Mitsubishi UFJ Morgan Stanley Securities, stated, "Global bond yields are rising sharply, with no factors currently able to change the market sentiment of selling off due to concerns about inflation and fiscal expansion that occurred last week." During the Asian trading session on Monday, the yield on 10-year US Treasury bonds rose by 3 basis points to 4.63%, the highest level since February 2025. The yield on 30-year US Treasury bonds has risen to over 5%, nearing the highest level since 2007. Yields on Australian and New Zealand government bonds also rose, while European bond futures remained under pressure. Finance Minister Kozo Yamamoto of Japan stated last Friday that G7 officials are expected to discuss the development of the bond market at a meeting scheduled in Paris on May 18-19. Kristina Hooper, Chief Market Strategist at Man Group, the world's largest publicly traded hedge fund, stated that the high yields on Japanese bonds may attract more domestic investors back and affect other sovereign debt markets. Hooper said, "This would push up yields on other assets, particularly US Treasuries." Analysis indicates that despite the current situation, the accelerated sell-off of Japanese government bonds is disrupting the global bond market, significantly narrowing the gap between its yields and those of major sovereign bonds. This is concerning, as higher borrowing costs could prompt wealthy Japanese investors to repatriate more funds held abroad back into the domestic market, affecting a wider range of asset classes. Meanwhile, the depreciation of the yen has exacerbated inflation risks and put pressure on the bond market, as there is increasing pressure on the Bank of Japan to raise interest rates. Overnight index swap data shows that the likelihood of a rate hike by the Bank of Japan at its June meeting is around 80%. Shuichi Ohsaki, Senior Portfolio Manager at Meiji Yasuda Asset Management, stated, "In addition to growing concerns about the government's supplementary budget, there is a strong belief that the Bank of Japan is unwilling to raise rates, exacerbating concerns that the Bank of Japan is falling behind in addressing inflation. The Japanese government must communicate clearly in fiscal and monetary policy to prevent interest rates from rising."