Super-long JGBs slip on oil-driven inflation woes, Iran tensions

By Satoshi Sugiyama

TOKYO, March 11 (Reuters) - Japan's super-long government bonds eased on Wednesday, as traders remained wary of inflation risks amid volatile crude oil prices tied to the ongoing U.S.-Israeli war against Iran.

The 20-year JGB yield JP20YTN=JBTC climbed 1 basis point (bp) to 3.040% while the 30-year yield JP30YTN=JBTC added 0.5 bps to 3.425%. The yield on the 40-year JGB JP40YTN=JBTC, Japan's longest tenor, rose 3 bps to 3.665%. Yields move inversely to bond prices.

"Even though oil prices have edged down somewhat, they are still staying high, leaving inflation worries lingering in the market," said Takahiro Otsuka, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities.

Global markets have been betting that U.S. President Donald Trump will seek to end the conflict soon, but Trump has also repeatedly threatened to hit Iran hard over moves to stop the flow of energy supplies through the Strait of Hormuz.

A Reuters poll published on Wednesday showed the Bank of Japan will keep its key interest rate steady at a policy meeting next week but likely raise it to 1.00% by end-June, expectations largely unchanged from the start of the war.

The benchmark 10-year JGB yield JP10YTN=JBTC fell 1 bp to 2.170%, while the two-year yield JP2YTN=JBTC, which is the most sensitive to BOJ policy rates, decreased 0.5 bps to 1.245%.

Meanwhile, the five-year yield JP5YTN=JBTC reversed course and declined following a stronger-than-expected auction result. Its bid-to-cover ratio was the highest since last October while its tail was the lowest since January 2025.

"Strong auction results pointed to firm demand for five-year debt, prompting more investors to buy rather than sell in the afternoon session," said Lisa Mochizuki, analyst at SMBC Nikko Securities.

($1 = 158.0000 yen)