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Disorderly Super Long JGBs May Need BOJ Support

ADMIN || 13th January 2026

The big yield dispersion at the long end of the Japanese bond curve shows no sign of reversing, which suggests BOJ intervention may be the only way to shore up the market. Moreover, talk of early Japanese elections will further undermine sentiment in JGBs as boosting stocks will be a priority for the government heading into any vote.

A yield gap of around 1.4% between on-the-run and off-the-run JGBs in the 40-year sector is even more extreme than the UK bond market, which is typically an outlier within the G-10 space. The underlying problem is the number of older JGBs with coupons below 1%, which means cash prices below 50.

Indeed, JGBs are back from a long weekend in a gloomy mood with 30-year bonds sliding in early business.

An already messy fixed-income set up could get even worse if PM Takaichi leans into bigger spending plans to drum up support. Which will make this month’s auction of 40-year debt, in just over two weeks, one of the toughest to navigate this year.

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