Japan's 10-Year Bond Yield Hits 30-Year High on Inflation and BOJ Bets

Japan's benchmark 10-year government bond yield surged to its highest level in nearly three decades on Monday, extending a global bond selloff driven by inflation concerns and expectations of tighter monetary policy.

The yield on the 10-year JGB climbed 5 basis points to 2.925%, a level not seen since September 1996. This marks the sixth consecutive session of gains, the longest such streak in over a year.

The move mirrored weakness in U.S. Treasuries, which fell on Friday after an initial rally faded despite softer-than-expected retail sales data. Persistent Middle East tensions and rising crude prices added to investor unease, while euro zone yields also ended last week higher.

"At present, a bearish outlook on government bonds is spreading globally, and the upward trend in yields is intensifying, which is a cause for concern," said Keisuke Tsuruta, senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities. "On the domestic front, uncertainty surrounding the Bank of Japan's pace of interest rate hikes and its terminal rate remains a key concern."

Other maturities also saw notable yield increases. The two-year yield, most sensitive to BOJ policy, added 3.5 basis points to 1.685%, its highest since May 1995. The five-year yield rose 2 basis points to 2.155%, set for a record close. The 30-year yield advanced 5 basis points to 4.06%, its highest close since July 7, while the 40-year yield gained 4 basis points to 4.115%, poised for its best close since May 25.

Monday's data showed Japan's economy expanded at an annualised 1.1% in the April-June quarter, well below the median forecast of 2.0%. Private consumption was flat, and capital spending fell 1.2% during the quarter.