JGBs rise ahead of Japan's two-year auction, reports WSJ.

JGBs rise ahead of Japan's two-year auction, reports WSJ.

Japanese government bond (JGB) yields rose on Tuesday, June 19, 2025, as investors reacted to the latest auction results and geopolitical developments. The 20-year JGB yield increased by 0.5 basis points (bps) to 2.345%, while the 10-year JGB yield rose by 1 bps to 1.415% [1].

The auction of 20-year Japanese government bonds saw an improvement over the previous outcome, which had been the worst since 2012 and triggered a bond sell-off. However, the auction did not demonstrate a significant rebound in demand for super-long bonds, according to Naoya Hasegawa, chief bond strategist at Okasan Securities. "The outcome was better than the previous auction, but it was the lower end of the expectations," he said [1].

The Ministry of Finance announced a plan to cut bond sales, aiming to boost demand for super-long bonds. Starting from July, the ministry will reduce 20-year JGB issuance by 200 billion yen ($1.4 billion) per sale and cut the sales of 30- and 40-year bonds by 100 billion yen at each sale. The reduction in sales will apply from next month, and the market still has a significant supply of bonds through this auction, said Miki Den, a senior Japan rate strategist at SMBC Nikko Securities [1].

Investor risk appetite also improved as U.S. President Donald Trump reported a ceasefire between Iran and Israel. This positive geopolitical development boosted global shares, with the benchmark Nikkei NI225 rising more than 1% [1].

The 2-year JGB yield rose by 0.5 bps to 0.735%, and the 5-year yield edged up by 0.5 bps to 0.965%. The 40-year JGB yield remained flat at 3.130% [1].

As the market awaits the upcoming auctions, investors will closely monitor the yield movements and the impact of the Ministry of Finance's plan to cut bond sales. The recent developments suggest a cautious but optimistic outlook for JGBs.

References:
[1] Reuters. (2025). Japanese government bond prices fall on Tuesday. Retrieved from https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3SR0CX:0-jgbs-fall-on-middle-east-ceasefire-moderate-auction-outcome/