Japan Bond Yields Hold Near Multi-Decade Highs Ahead of 40-Year Auction

Japanese government bond yields remained close to multi-decade highs on Tuesday, as inflation pressures and expectations of further central bank tightening set the stage for an auction of the market's longest-dated debt.

The benchmark 10-year JGB yield edged up 0.5 basis points to 3.090%, staying near the 30-year high of 3.115% reached last week. Bond yields move inversely to prices.

Japan's Ministry of Finance was due to sell about 300 billion yen ($1.91 billion) of 40-year JGBs later in the session, with an auction of two-year notes scheduled for Wednesday.

Global bond markets have remained under pressure, with U.S. Treasury yields climbing to multi-year highs. The move has been driven by inflation fears tied to surging oil prices and expectations that the Federal Reserve will raise rates further.

"Yields on newly issued 40-year bonds are near record highs, and with these high yields, some demand is expected from life and non-life insurance companies, as well as foreign investors," Takayuki Miyajima, senior economist at Sony Financial Group, said in a note.

"On the other hand, speculation about additional rate hikes by the Bank of Japan, expectations of a rising terminal rate, and concerns over fiscal expansion continue to weigh on the market," he said.

The yield on the 40-year JGB, Japan's longest tenor, was flat at 4.225%. The 20-year and 30-year yields also held steady, at 3.915% and 4.170%, respectively.

The two-year yield, the tenor most sensitive to Bank of Japan policy rates, was unchanged at 1.965%. The five-year yield held at 2.420%, just below the record high touched on Monday.