Japan's Longest Bond Joins the Rest as 40-Year Yield Below 1%

Japan’s 40-year government bonds advanced, joining the rest of the nation’s debt in offering yields below 1 percent, as negative payouts on shorter-dated notes enhanced the allure of the nation’s longest securities.

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Forty-year yields touched a record low of 0.99 percent as commodity prices dropped, sustaining demand for haven assets. Japanese yields on bonds with up to 10 years to maturity have been offering negative yields since the Bank of Japan began charging lenders on their excess reserves from Feb. 16.

“While 40-year yield fell below 1 percent, it was the only bond with more than 1 percent yield, so investors such as insurers whose duration on the assets had become shorter might have bought them,” said Shuichi Ohsaki, the chief Japan rates strategist at Bank of America Merrill Lynch.

Yields on 1.4 percent government notes maturing in March 2055 dropped 4 1/2 basis points to 0.99 percent as of 1:40 p.m. in Tokyo, according to Japan Bond Trading Co., the nation’s largest inter-dealer debt broker. The price rose 1.395 yen to 111.547. Ten-year yields fell half a basis point to minus 0.06 percent, after falling to a record low minus 0.065 percent. A basis point is 0.01 percentage point.

Japanese government bonds have returned 2.8 percent this year, while U.S. Treasuries have gained 3.1 percent, according to Bloomberg bond indexes.

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