Japanese Investors Shift Toward Domestic Bonds as Yields Rise

U.S. debt. Yields on 10-year and 30-year Japanese government bonds have reached their highest levels since the 1990s. The Bank of Japan is expected to raise rates for the fifth time since 2024.

U.S. markets. Higher domestic yields now make Japanese bonds more competitive with Treasuries. March recorded the largest monthly inflow into Japanese sovereign bond funds. U.S. corporate bonds or Treasuries. The asset manager launched its first Japanese bond fund in March. 75 percent to 1 percent next month.

The Treasury Department sold $25 billion of 30-year bonds at a 5 percent yield, the first time since 2007. Auctions for two-, five-, and seven-year notes in March also drew weak demand. A flood of corporate bond issuance is competing with Treasuries for buyers.

U.S. bonds in recent years. More price-sensitive hedge funds have taken larger positions. The Treasury Department announced last week that it expects to borrow more than initially projected this quarter. Higher yields increase annual interest costs, which are running at $1 trillion.

The deficit path has added pressure on borrowing needs. Mark Malek, chief investment officer at Siebert Financial, noted that the 10-year Treasury yield has fallen only 35 basis points since mid-2024 despite Federal Reserve cuts of 175 basis points.