Overview

• Yields on Japan’s 20- to 40-year government bonds rose to their highest levels in decades as election-related spending pledges and thin market liquidity triggered heavy selling.
• Germany’s 30-year bond yield climbed to 3.26%, its highest since October 2023, while benchmark Bund yields reached 2.737%, driven in part by spillover from the Japanese sell-off.
• Investors have scaled back purchases of super-long JGBs in the run-up to the July 20 upper house election, reducing market depth and amplifying price swings.
• The rout in Japanese debt followed a drop in U.S. Treasury prices as renewed inflation concerns resurfaced, pushing global sovereign yields higher.
• Traders are now positioning for the Bank of Japan to raise one or more inflation forecasts at its policy meeting later this month, which could further influence bond markets.