Japan 40-Year Bonds Trade First Time in Four Days Before Auction

Japan’s 40-year bonds traded for the first time in four days at the nation’s largest inter-dealer debt broker before the Ministry of Finance auctions 30-year debt on Thursday.

The last time the country’s longest-dated debt stayed untraded for more than three days was in July, when yields were almost four times higher, according to data from Japan Bond Trading Co. in Tokyo. Yields on bonds with maturities as long as 10 years have gone negative since the Bank of Japan announced in January that it would start charging lenders on some of their excess reserves held with the central bank. Yields on about 70 percent of all Japanese government bonds are below zero.

“Life insurers buy the sector on the assumption they will largely hold until maturity, so these bonds aren’t coming to secondary markets that often,” said Takafumi Yamawaki, the chief rates strategist in Tokyo at JPMorgan Chase & Co. “Some dealers may sell 40-year bonds to make room for new 30-year bonds.”

Yields on 1.4 percent government notes maturing in March 2055 rose two basis points to 0.445 percent as of 1:59 p.m. in Tokyo, according to Japan Bond Trading. The price fell 0.888 yen to 131.687. Thirty-year yields climbed one basis point to 0.41 percent, while 10-year yields gained one basis point to minus 0.085 percent. A basis point is 0.01 percentage point.

Japanese government bonds have returned 4.9 percent this year, while U.S. Treasuries have gained 3.3 percent, according to Bloomberg bond indexes.

“The 40- and 30-year yields aren’t that different and there aren’t active buyers,” said Tadashi Matsukawa, the Tokyo-based head of fixed-income investment at PineBridge Investments Japan. “On the other hand, there’s not a lot of supply, so there aren’t that many sellers either.”

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