30 30-year JGBs Loading... : Investor Sentiment and Bull/Bear Views

Kaiser says global bond yields are the number-one risk for markets. JGB yields have moved higher, and the broader risk has been simmering since July of last year when 30-year yields in the US, UK, Germany, and Japan all got above 3% for the first time. He warns that JGB yields can be persistent; if those yields rise and spill over or cascade, the risk could become more persistent and damaging to markets. He notes the US 30-year yield was up 8 basis points today while gilts and bunds did not move as much.

JGB yields should ultimately be much higher because Japan has a massive debt problem and is about to expand fiscal policy aggressively. The 30-year JGB yield has already surged 40 basis points since Friday and could keep rising, especially with an election approaching and the BOJ potentially hiking to defend the yen, creating a self-reinforcing selloff. This is a domestic Japanese problem for now, but when JGBs find a floor, it will have global consequences.

The 10-year JGB auction is expected to see decent demand with yields around 2.11%-2.12%, but if demand is weak it would not bode well for Thursday's 30-year auction and could send shockwaves across the curve.