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JGB yield and yield curve scenarios for June and FY25-FY27
Long-term and super-long-term GB yield scenario for June
The 10-year JGB yield is expected to fluctuate in a range centered around the 1.4% to 1.5% levels, rising if resurgent supply/demand concerns in the super-long sector trigger a bear steepening, and falling back if expectations of reduced issuance help stabilize the super-long sector. It is likely to be easily swayed by news headlines given the various events scheduled for June and July, making it difficult for a clear sense of direction to form. In particular, July will bring the end of the 90-day grace period (on July 9) for reciprocal tariffs imposed by the US Trump administration as well as Japan’s Upper House election. Investors will probably remain reluctant to buy on dips until they have a better idea of how these events are likely to turn out.
Since the April 2 "tariff shock," the JGB market has been characterized by a tug-of-war between buyers, who have been energized by concerns about an economic downturn and fading speculation of BoJ rate hikes, and sellers, who have been driven by worries of expansionary fiscal policy along with supply/demand concerns in the super-long sector. The former prevailed in April, while in May the latter were dominant. BoJ rate hike speculation has picked up again, and we see few catalysts that would cause it to fade substantially until the US-Japan trade talks come to a conclusion. In the super-long sector, the results of the 30-year JGB auction on June 5 and the MoF’s meeting of JGB market special participants (primary dealers)on June 20 are likely to influence short-term market sentiment. In addition, the BoJ will conduct an interim review of its bond purchase reduction plans and reveal its plans for FY26 onward at the June 16-17 Monetary Policy Meeting. While the consensus seems to be that no changes will be made to the current plans, which run through the end of FY25, investors appear to be divided on whether they expect the pace of reductions to accelerate, slow, or hold steady in FY26 and beyond. It may take some time for the market to digest the results if the BoJ’s decision or discussion contain any surprises
