Japanese bond yields come off the boil for the time being

Current Status of the Japanese Bond Market

The recent movements in the Japanese bond market are particularly noteworthy. Last week, the 40-year yield reached 4% for the first time, while the 30-year yield approached that level. This sharp increase has been remarkable, as the 40 basis points range is typically something that would occur over a year or longer, making the current weekly range abnormal.

Present Slide in Yields

Currently, the 30-year yield has slid down to 3.71%, yet it's essential to note that this is still 22 basis points higher for the week. This movement appears to be temporary, as the underlying market fundamentals have not changed, suggesting that sustainability is unlikely.

Fiscal Concerns and Shift to Gold

Policy makers in Tokyo will need to tackle the rising fiscal and debt issues soon. With the declining popularity of the US dollar, there seems to be a shift towards gold as a safe haven, fueled by these developments. Market players expect significant progress following the upcoming snap election announcement set for February 8, reflecting growing investor anxiety and market volatility.