JGB

On December 3, 2025, Japanese Government Bonds (JGBs) are under significant selling pressure, driving yields to multi-year or record highs amid heightened expectations for a Bank of Japan (BOJ) rate hike at its December 18-19 meeting. This follows hawkish comments from BOJ Governor Kazuo Ueda on December 1, signaling the central bank will weigh "pros and cons" of raising the policy rate from 0.5% to 0.75%. The move is exacerbating concerns over Japan's massive public debt (over 250% of GDP) and aggressive fiscal stimulus under Prime Minister Sanae Takaichi's administration, which could fuel inflation and force further tightening. Despite BOJ interventions (including ¥1.1 trillion in purchases today), banks are offloading holdings, adding to supply and pushing yields higher. This has strengthened the yen, pressured equities (Nikkei down 3.2% in recent sessions), and raised global ripple risks, as Japan's low-yield bonds have long been a source of cheap capital for overseas investments like U.S. Treasuries.

Key Yield Movements TodayYields rose across the curve, with longer-dated bonds hit hardest due to auction caution and stimulus fears. Here's a snapshot of major JGB yields as of midday Tokyo trading:

Maturity	Yield (%)	Change (bps)	Notes
2-Year	1.015	+1	Near 17-year high; most sensitive to policy rate.
5-Year	1.385	+2	Highest since June 2008.
10-Year	1.89–1.90	+3–3.5	Highest since June 2008; benchmark borrowing cost.
20-Year	2.910	+3.5	Multi-year peak.
30-Year	3.43	+5	Record high (intraday hit 3.41% earlier).
40-Year	3.740	+5.5	Surged on long-end sell-off.

Data compiled from real-time quotes; the 10-year is ~0.84% higher year-over-year, reflecting the end of Japan's ultra-low rate era. Futures for December 2025 JGBs traded slightly lower at 134.51 (down 0.06%).Driving Factors

• BOJ Hawkishness and Rate Path Uncertainty: Markets now price an ~80% chance of a December hike, with January odds at 90%. Ueda's remarks triggered the heaviest JGB sell-off since July, as investors fret over hikes beyond December amid sticky inflation (core CPI at 2.8% in October).
• Fiscal Stimulus Concerns: Takaichi's plans for ¥20+ trillion in spending (via bonds) are seen as inflationary, clashing with debt sustainability. This has soured sentiment ahead of tomorrow's 30-year auction.
• Institutional Selling: Banks, insurers, and the BOJ itself dumped a record ¥10.7 trillion in JGBs in September; today, banks sought to offload ~¥2 trillion, but BOJ bought only ¥1.1 trillion—leaving excess supply for open-market sales. Major holders (BOJ ~50%, banks/insurers ~40%) prioritize liquidity over yield-chasing.
• Global Spillover: The yen carry trade unwind (borrowing cheap yen to fund higher-yield assets abroad) is accelerating, with USD/JPY nearing 150. Falling U.S.-Japan yield spreads (e.g., 30-year at March 2022 lows) could repatriate Japanese capital, pressuring U.S./global assets.

Market Sentiment and Outlook

• Positive Note: A recent 10-year auction saw strong demand (bid-to-cover ratio 3.59, above average), steadying the yen and Nikkei somewhat today.
• Bearish Vibes on X: Traders warn of "bond market rout" and "global liquidity crunch," with calls for 10-year yields >2% by Christmas. Some speculate Saudi or foreign bailouts, but focus remains on BOJ's balancing act between yen stability and growth.
• Forecast: Trading Economics sees 10-year at 1.79% by Q4 end, but upside risks loom if household spending data (due Friday) supports hikes. Watch for BOJ tapering yield curve control further—yields could test 2008 peaks if unchecked.

This volatility marks a pivotal shift: Japan's "zero-rate forever" playbook is obsolete, potentially reshaping global flows. For real-time updates, monitor BOJ announcements.