Japanese government bonds rallied across the board on Wednesday, with the ultra-long end leading the gains as active short covering took place ahead of tomorrow's 20-year bond auction.

智通财经2026/08/19 09:51

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Japanese government bonds continued their rebound on Wednesday, boosted in the morning session by lower overnight US Treasury yields. Later, strong regular bond purchase operations by the Bank of Japan further pushed the market higher. The futures opening price of 126.11 became the day's low. Tokyo participants focused more on US Treasuries than on European bonds.
The yield curve experienced intraday fluctuations. The 10-year yield once fell to 2.855%, down 5 basis points from yesterday. Both the 20-year and 40-year yields fell by 6 basis points, closing at 3.785% and 4.145% respectively, with the ultra-long end performing particularly well.
A Japanese securities firm trader pointed out that the 20-year bond led the gains mainly because large life insurance companies had already made phased purchases during the recent decline. Dealers were willing to establish short positions to cover at tomorrow’s auction. Meanwhile, yesterday’s strong 5-year government bond auction result triggered buybacks in the medium and short end, further supporting the long end’s performance.
However, the trader emphasized that today’s gains do not necessarily indicate tomorrow’s 20-year auction will go smoothly. As yields have fallen to lower levels, their attractiveness to investors has diminished. Yen interest rates have moved away from 30-year highs, and institutions remain cautious about substantially resuming buying interest.

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Japanese government bonds rallied across the board on Wednesday, with the ultra-long end leading the gains as active short covering took place ahead of tomorrow's 20-year bond auction.

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