Japanese government bonds rallied on Friday as investors bought ultra-long JGBs
to unwind prior bets on a steeper yield curve amid rising odds of faster BOJ
tightening and a stronger yen. The 30-year JGB yield fell 10.5bps to 3.97% and
the 40-year yield dropped 13bps to 4.03%. Short-dated yields moved less: the
policy-sensitive 2-year yield slipped 2bps to 1.83%. Mitsubishi UFJ Asset
Management’s chief fund manager said investors who had positioned for
steepening—fearing the BOJ was behind the inflation curve—are closing those
trades and shifting toward flattening.
