Japan’s 40-Year Bond Auction Sees Weakest Demand in Months Amid Market Volatility

Japan’s $3.5 billion 40-year bond sale recorded the lowest demand since July 2024, signaling growing investor reluctance in the super-long debt market. The bid-to-cover ratio—a key measure of auction appetite—dropped sharply as domestic life insurers and long-end buyers retreated. Traders describe the trend as a ’buyers’ strike,’ underscoring mounting concerns over Japan’s debt sustainability.

Market volatility exacerbated the weak turnout. Yields on 40-year bonds initially fell to 3.29% amid speculation of reduced government issuance, only to rebound to 3.37% post-auction. The erratic swings follow last week’s dismal 20-year bond sale, where yields surged to multi-decade highs, spilling over into 30- and 40-year debt. Barclays analysts warn of a fragile supply-demand balance, suggesting structural shifts in Japan’s bond market dynamics.