Japanese Super-Long Bond Prices Rebound as Investors Unwind Steepener Bets

According to Jin10, Japanese government bond prices extended their gains on Friday as investors bought super-long bonds to close out trades betting on a steeper yield curve. The market expects the Bank of Japan to accelerate the pace of rate hikes. The 30-year Japanese government bond yield fell 10.5 basis points to 3.97%, the 40-year yield fell 13 basis points to 4.03%, and the 2-year yield, which is more sensitive to policy rates, fell 2 basis points to 1.83%. A chief fund manager at Mitsubishi UFJ Asset Management said investors had previously bet on a steeper yield curve because they were worried the Bank of Japan was lagging behind on tackling inflation, but they are now closing those positions and shifting to bets on a flatter yield curve as expectations for BOJ rate hikes rise and the yen strengthens.