By Rocky Swift
TOKYO (Reuters) -Japanese government bonds remained stable on Friday, after a volatile week in which super-long yields hit record highs as inflation and fiscal concerns sapped demand for debt.
Yields on 20-, 30-, and 40-year Japanese government bonds have been climbing, fuelled by growing concerns over the country’s worsening fiscal health, as some political parties advocate for consumption tax cuts to counter rising prices.
Data on Friday showed Japan’s core consumer inflation hit 3.5% in April, its fastest annual pace in more than two years, and keeping pressure on the Bank of Japan to continue raising interest rates.
A weak auction of 20-year bonds on Tuesday underscored the market’s diminishing capacity to absorb new debt needed to finance the government’s fiscal deficit.
BOJ Governor Kazuo Ueda said on Thursday that the central bank will closely monitor market developments, as yields on super-long JGBs climbed to record highs this week.
“The risk of JGBs becoming ‘indigestible’ in the ultra-long term zone remains,” Mizuho analysts said in a research note on Friday. “The incentive to reduce issuance of super-long bonds (thereby shortening the duration) is relatively strong.”
The 30-year JGB yield rose 1 basis point to 3.175%, hovering near an all-time high of 3.185% hit on Wednesday. The 40-year yield slid half a basis point to 3.665%, edging lower from the record 3.675% touched on Thursday.
The benchmark 10-year JGB yield fell 0.5 basis point to 1.555%. The two-year yield rose 0.5 basis point to 0.735%, and five-year yield was flat at 1.03%.
(Reporting by Rocky Swift; Editing by Sherry Jacob-Phillips)
