BAF NEWS

The November 2025 40-year JGB auction cleared at 3.555%, the steepest on record, as investors braced for a boj december rate hike. Demand held up, with a roughly 2.59 bid‑to‑cover, even as yields jumped across the curve.

JGB yields spike on BOJ hike expectations

Short-end benchmarks pushed toward a jgb yields 17-year high as traders priced a near-term policy shift. In early trading on Nov. 26, the 10-year jgb yield 1.805%, according to market reports, while 20-year yields also edged higher. Reuters has reported that recent BOJ communication, including board member remarks, helped lift shorter tenors toward a jgb yields 17-year high.

November 2025 40-year JGB auction: record 3.555% yield, 2.59x demand

At the long end, the 40-year sale delivered a new high watermark. Ministry of Finance data show a highest accepted yield of 3.555% and accepted bids near ¥400 billion, with total competitive bids around ¥1.03 trillion. The bid-to-cover ratio printed about 2.59, signaling solid participation despite elevated term premiums. Notably, the 40-year jgb auction 3.555% level marked the cycle’s peak for this tenor.

Why demand held firm at the long end

Investors accepted deeper duration risk amid rising compensation for inflation and policy uncertainty. Moreover, steady domestic sponsorship and liability-driven buyers helped absorb supply at higher yields. Consequently, the 40-year jgb auction 3.555% outcome aligned with a broader repricing rather than a demand air pocket.

Timeline: inflation, yields and the November 2025 40-year JGB auction

The setup began with inflation signals. Japan services PPI 2.7% in October pointed to persistent price pressure in labor-intensive sectors. Then, into Nov. 26, short-end yields climbed and the 10-year jgb yield 1.805% in early trading, while desks prepared for the long-bond sale. Finally, the November 2025 40-year JGB auction cemented the curve’s move with a record clearing yield. As a result, markets shifted from debating direction to calibrating magnitude.

BOJ signals shift toward a December rate hike

Policy signaling sharpened the rates narrative. Reuters reported the BOJ is preparing markets for a possible increase as soon as next month, tilting pricing toward a boj december rate hike. Moreover, FX dynamics and inflation risks have increasingly featured in official commentary. Therefore, traders continue to assign rising odds to a boj december rate hike while monitoring incoming guidance.

How the November 2025 40-year JGB auction reflects the curve

The auction result captured a synchronized bear-steepening impulse. Short tenors rose on policy expectations, the belly followed with higher term premiums, and the ultra-long end set a record yield. Still, the firm cover ratio suggested that higher real yields are drawing in patient capital. Consequently, the November 2025 40-year JGB auction offers a clean read on both demand resilience and the cost of duration risk.

What to watch in liquidity and term premium

Liquidity has held up in benchmark lines, though hedging costs remain in focus. Additionally, supply cadence and insurer allocation patterns will shape ultra-long swings. However, if Japan services PPI 2.7% persists and wage gains broaden, term premium could stay elevated.

What’s Next: data and BOJ decision window

Focus now turns to official communications, inflation updates, and wage indicators that will inform the board’s calculus. According to available reports, policymakers are preparing markets for a potential move as soon as December, keeping volatility elevated. Until the decision window closes, traders will test new ranges across tenors while watching whether near-term data reinforce the tightening case.