Global Bonds Rally as Japan Looks to Stabilize Its Debt Market

Link copied

Global Bonds Rally as Japan Looks to Stabilize Its Debt Market.

treasuries & bonds :: 2025-05-27 :: source - bloomberg

By Ruth Carson

(Bloomberg) — A rally in Japanese bonds rippled around the world amid signs that the nation’s authorities are looking to re-establish stability after a tumultuous period for the market.

Most Read from Bloomberg

Long-dated debt led gains, with 30- and 40-year yields in Japan dropping about 20 basis points. Rates on 30-year Treasuries and gilts fell nine basis points to 4.95% and 5.39% respectively, the lowest levels in a week. European bonds also rallied.

Japanese finance ministry sent a questionnaire to market participants regarding bond sale amounts, after a sale of 20-year debt last week got the weakest demand in more than a decade and sparked a painful global rout. Traders took it as a sign that Japanese authorities are seeking to restore calm in the world’s third-largest bond market.

“That potential lower issuance is giving Treasuries a nice helping hand,” said Michael Brown, strategist at Pepperstone Group in London. “For those seeking to buy long-term debt, lower JGB supply could force them into the Treasury complex.”

Bond yields rose across developed markets last week as investors worried about the ability of governments to cover massive budget deficits, pushing 30-year Treasury yields toward levels last seen in 2007. Japan’s bond market has also been squeezed by signs that the central bank may attempt to taper its huge holdings of government bonds further.

The chance that Japan’s government will reduce its bond supply goes at least some way to addressing the worries over demand. But it doesn’t address wider concerns about government finances globally, raising the possibility that Tuesday’s bond rally is only a brief pause in the tumult.

“Long-end yields are experiencing some relief, but we think US yields will find it particularly difficult to shake off a bearish taint over the coming weeks and months,” said Benjamin Schroeder, senior rates strategist at ING. “The fiscal trajectory still matters.”

Long-term government bonds yields in Australia and New Zealand also fell on Tuesday as investors reacted to the news.

Some other bond markets have already shifted issuance toward shorter-dated tenors. Jessica Pulay, head of the UK’s debt management office, reiterated that the agency was steering away from longer-dated bond sales given falling investor demand, in an interview published with the Financial Times on Tuesday.